Tuesday, November 19, 2019

A Reminder That The Tax Rate Should Be Zero

Though the tax rate in the U.S. on corporate residents is 21%, a useful cut from the Obama era 35% rate, then the fourth-highest in the world, says the Tax Foundation, America's corporate rate is still roughly in the midstream of 208 nations, slightly below the global average of 23.03%. While the U.S. still punishes businesses for making profits, FedEx was able to push its tax bill down to zero by working its way through the Byzantine tax code.

When GE supposedly had a zero tax bill on $14 billion in profits in 2011, it filed a 57,000-page federal tax return.

The George Mason University economist has been rightfully critical of "a corporate tax system which wastes a lot of resources and raises relatively little revenue," which turns out to be only about $225 billion a year, less than a quarter of the federal deficit.

Despite the howling from the left, the ideal corporate tax rate is zero.

Under that structure, "Corporations would not need to scour the tax code for loopholes or prepare millions of pages of tax returns. Think of all the talented lawyers, accountants and financial analysts who could do better things with their time," say a couple of finance professors.

According to the Tax Foundation, about $150 billion is taken out of the economy each year to prepare corporate taxes, "And that doesn't count the distortions that the corporate tax code introduces, as companies try to structure operations to lower their tax burden even if that doesn't make the most business sense," says Washington Post columnist Megan McArdle.

Albert "Pete" Kyle, a finance professor at American University, also supports a zero corporate tax rate, because "Taxing corporate profits makes aggregate economic output smaller and reduces economic growth." A low rate relative to the rest of the world would reduce "The current incentives corporations have to move their businesses out of the U.S." A zero rate would nearly eliminate the incentives to relocate - nearly not all because state corporate taxes are still a burden with steep compliance costs.

https://issuesinsights.com/2019/11/19/fedex-paid-paid-no-federal-corporate-taxes-in-2018-which-reminds-us-the-ideal-corporate-tax-rate-is-zero/

No comments: