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How About This Instead?
President Barack Obama has announced that his next tax endeavor will be to focus on pursuing companies that utilize tax "loopholes" to lower their tax bill, so-called "tax havens" where income is shielded, and will hire over 800 new IRS agents to help ensure compliance. The total effort, he says, will be an increase of $21 billion per year (approximately 1% of the total FY2009 budget). In his speech announcing his new initiative, the President derided the current system as one that makes it more tax-friendly to create jobs overseas than within the United States. He also seemed to suggest that businesses that use legal methods to decrease their tax burden are somehow acting in an un-patriotic manner.
Instead of looking to improve compliance with an expensive, complicated, inefficient tax code and spend more taxpayer money on more government intrusiveness, instead of worrying about corporations seeking "tax havens" to lower their tax burden, there's an easier answer: simplify the US tax code and reduce the taxes on businesses here in America. Instead of increasing government intrusiveness, a simplified tax code would reduce government's heavy hand in attempting to micromanage corporations. Instead of a high rate that encourages overseas investment, a lower rate with fewer loopholes could promote investment by foreign and domestic companies here in America.
In addition, a simpler tax code with lower rates would provide less of an incentive for businesses to spend massive amounts of money to get out of paying taxes or to cheat, and would mean fewer compliance agents rather than more. Audits would be easier, more straightforward, and less necessary. Government would have less power to choose winners and losers in the marketplace, and fewer opportunities to enact policies with harmful unintended consequences. Every dollar not sent to the government is a another dollar businesses would have to hire additional workers, increase employee compensation, pay dividends to shareholders, or invest in capital improvements.
Even within the United States, business and corporate tax laws vary from state to state in intrusiveness and complexity; as a result, we've seen industries move from high-tax, heavily unionized "Rust Belt" states to more tax-, worker-, and business-friendly states in the South and West. The same concept applies: lower the cost of tax compliance and tax bill, and businesses and industries are more likely to flourish and grow. The US has one of the highest corporate tax rates in the industrialized world, and with the "Bush tax cuts" set to expire, that rate will soon increase further. Why shouldn't corporations move to more tax-friendly homes internationally?
It isn't un-American, unethical, or immoral for a company or individual to do everything within the confines of the law to avoid paying taxes — it is simply good sense. But it makes even better sense for the government to implement the most efficient means possible of collecting the tax it is owed. Instead of clamping down on businesses, how about freeing them up to create prosperity instead? That would be true economic "stimulus".
Instead of looking to improve compliance with an expensive, complicated, inefficient tax code and spend more taxpayer money on more government intrusiveness, instead of worrying about corporations seeking "tax havens" to lower their tax burden, there's an easier answer: simplify the US tax code and reduce the taxes on businesses here in America. Instead of increasing government intrusiveness, a simplified tax code would reduce government's heavy hand in attempting to micromanage corporations. Instead of a high rate that encourages overseas investment, a lower rate with fewer loopholes could promote investment by foreign and domestic companies here in America.
In addition, a simpler tax code with lower rates would provide less of an incentive for businesses to spend massive amounts of money to get out of paying taxes or to cheat, and would mean fewer compliance agents rather than more. Audits would be easier, more straightforward, and less necessary. Government would have less power to choose winners and losers in the marketplace, and fewer opportunities to enact policies with harmful unintended consequences. Every dollar not sent to the government is a another dollar businesses would have to hire additional workers, increase employee compensation, pay dividends to shareholders, or invest in capital improvements.
Even within the United States, business and corporate tax laws vary from state to state in intrusiveness and complexity; as a result, we've seen industries move from high-tax, heavily unionized "Rust Belt" states to more tax-, worker-, and business-friendly states in the South and West. The same concept applies: lower the cost of tax compliance and tax bill, and businesses and industries are more likely to flourish and grow. The US has one of the highest corporate tax rates in the industrialized world, and with the "Bush tax cuts" set to expire, that rate will soon increase further. Why shouldn't corporations move to more tax-friendly homes internationally?
It isn't un-American, unethical, or immoral for a company or individual to do everything within the confines of the law to avoid paying taxes — it is simply good sense. But it makes even better sense for the government to implement the most efficient means possible of collecting the tax it is owed. Instead of clamping down on businesses, how about freeing them up to create prosperity instead? That would be true economic "stimulus".
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