The Instigator
Victorian
Pro (for)
Losing
0 Points
The Contender
AdamCass
Con (against)
Winning
3 Points

Corporate Tax Should be Abolished

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Post Voting Period
The voting period for this debate has ended.
after 1 vote the winner is...
AdamCass
Voting Style: Open Point System: 7 Point
Started: 6/10/2014 Category: Politics
Updated: 2 years ago Status: Post Voting Period
Viewed: 802 times Debate No: 56398
Debate Rounds (4)
Comments (1)
Votes (1)

 

Victorian

Pro

Sorry for the false start earlier, I will be arguing that the corporate tax is logically flawed, economically harmful, and that other methods of raising tax revenue are preferable. First round is for acceptance only.
AdamCass

Con

Thank you for restarting this debate. I accept the challenge, and shall be arguing that corporate taxation is a fundamentally important tax measure and should not be abolished, but rather improved. Best of luck to you!
Debate Round No. 1
Victorian

Pro

Thank you AdamCass.

It is important to remember that a corporation is not a single entity, but a group of people. When a corporation is taxed, the tax burden falls on all of the customers, employees, and shareholders of that corporation. Corporations handle enormous amounts of money, but their balance sheets add up to zero. Every cent of income that a corporation receives from its customers is spent either paying workers or other business, reinvestment, or paying dividends to shareholders. In order to pay taxes, a corporation must either reduce investment, hire fewer workers, pay its workers less, charge customers higher prices, or pay lower dividends to its shareholders. While it is tempting to believe that corporations are sole property of the super rich, this is not in fact true. A single corporation can be owned by thousands of people, and everybody with a mutual fund is a partial owner of an enormously "wealthy" corporation. Corporate tax decreases the dividends that are paid to people (many of them retired) who own a small share of that corporation. Taxes on "rich" corporations are advertised as checks on the wealthy, but the reality is that they often hurt middle class and poor people (consumers, workers, and retirees) as well as the rich. A tax on very high incomes or large fortunes is a far more effective way of taxing the wealthy, and does not directly harm the middle class or the poor.

All taxes cause some harm to the economy, but the corporate tax is especially (and unnecessarily) harmful. If a government that did not have a corporate tax were to raise the the existing income tax rate, this might be economically unwise, but it would be much better than establishing a corporate tax, because creating a corporate tax would create even more tax paperwork. (The time and money spent on tax paperwork is not insignificant in our byzantine tax system) Abolishing the corporate tax would streamline and simplify the tax code even if the change were accompanied by raising the income tax rate. (It could also be argued that taxes on businesses are more economically damaging than taxes on consumers, but this is not universally agreed upon by economists)

Ironically, the arguments in support of the corporate tax rest on the fallacious idea that a corporation is a person, the idea that a corporation is a single, colossally rich, monolith, rather than a group of people, many of whom are middle class and poor.
AdamCass

Con

Thanks for submitting your argument Victorian.

Firstly I'd like to discuss your first argument, which deals with corporate personhood. I accept that corporations consist of many people, however the law views corporations in a different manner. Since the Trustees of Dartmouth College v. Woodward case, 1819, and subsequent U.S. Supreme Court cases, have ruled that a corporation should be guaranteed the same rights as a natural citizen of the United States. Such legal interpretation of the state of corporations has been used to argue against corporate regulation, upholding a corporation's right to donate to political parties and many various other cases, where corporations have claimed personhood for their own personal betterment. With this interpretation, it is only fair that this 'legal citizen of the United States' pay tax. Corporations, as much as they would like to, cannot only have the better side of the deal.

Corporate taxation contributed to 10% of US Federal government revenue in 2013, over $234 billion. This is a substantial amount of money, money that goes into education, health, infrastructure, the military and many other key areas of government spending, all of which rely entirely on such finances. Ultimately, the supposed 'burden' on middle and lower class Americans from corporate taxation is removed, because the revenue raised goes into necessary services for these people. To the average American, a well funded local public school and appropriately maintained roads are simply more important than $5 or $10 off the weekly shopping bill. Furthermore, the competitive nature of retail and industry in this country, between corporations, practically force prices down to as low as possible. The removal of a corporation tax would be unable to in any means lower or reduce overall prices dramatically enough to impact someone's back pocket.

Furthermore, the United States is in a chaotic fiscal climate. While debt and deficit continues to restrict the ability of the United States Government to deliver various services in a climate of fiscal austerity, the removal of a major revenue raiser would only further impact the budget. If the government, like you suggested, were to instead raise income taxes and abolish/lower corporate tax, this would have a direct impact on the American middle class, through additional taxation. This would grossly reduce spending and slow economic growth, which is a much greater burden on corporations than a corporate tax that has always been implemented. Any attempt now, or in the foreseeable future, to change the tax system in such a negative way would ultimately lead to the detriment of the US economy, the American middle and lower class and the United States budgetary crisis.

Also, I agree that not all corporations are large, wealthy multinationals. The law and the US tax code recognizes this. In the United States, there are many different types of business ownership/entities, which are recognized under federal and state law. For example, a small business in Wyoming classified as a sole proprietorship would be taxed differently to a multinational corporation based on Wall Street. The corporate tax system is flexible in that respect, and larger more affluent corporations are taxed higher than smaller businesses.
Debate Round No. 2
Victorian

Pro

Thank you AdamCass,

I will quote my opponents arguments and try to refute each one individually.

1."With this interpretation, it is only fair that this 'legal citizen of the United States' pay tax. Corporations, as much as they would like to, cannot only have the better side of the deal."

My opponent argues that corporations are "guaranteed the same rights as a natural citizen" and thus should pay taxes as a citizen would. I think that this argument falls apart under close examination. It makes sense that a corporation would have the right to "use" the roads, because what this means is that the owners of a corporation have the right to employ somebody to use the roads. Since all the owners of the corporation and the employees all have the right to use the roads, it makes sense that they still have this right when they call their arrangement a "corporation". Because all of the members of a corporation individually pay tax for these services, it does not make sense to require them to pay a second layer of tax through their corporation.

But even if you disagree with this point, there is still good reason to reject my opponent"s argument. First, one foolish policy does not justify another, so if corporate personhood is a foolish policy, and it is the justification for corporate tax, the solution is not to keep both, but to get rid of both. Second, if you believe that a corporation is a "'legal citizen of the United States"" then "it is only fair that this 'legal citizen"" pay the same tax as any other legal citizen, that is, the income tax. If you believe that a corporation should pay tax just like any other citizen, then the argument should be to apply income tax to corporations, not to have a separate tax system just for corporations.

2."Corporate taxation contributed to 10% of US Federal government revenue in 2013, over $234 billion. This is a substantial amount of money, money that goes into education, health, infrastructure, the military and many other key areas of government spending, all of which rely entirely on such finances."

Certainly, an enormous amount of money is generated by the corporate tax, but as we have already demonstrated, corporate tax is simply not the most economically efficient way to raise revenue. That is, the harm to the economy cause by generating an additional $234 billion of income tax revenue would be less than the harm inflicted by the $234 billion generated by the corporate tax. (As I explained in Round 2, this is largely due to the mountains of additional and unnecessary paperwork that having two separate tax codes creates) Even better than increasing the income tax would be creating a new tax on a currently unused revenue source such as natural resources. To summarize, all of the public services currently funded by the corporate tax could receive the EXACT SAME AMOUNT OF FUNDING, AT LESS HARM TO THE ECONOMY, if the corporate tax were abolished and replaced with a better method of raising revenue.

3."Furthermore, the competitive nature of retail and industry in this country, between corporations, practically force prices down to as low as possible. The removal of a corporation tax would be unable to in any means lower or reduce overall prices dramatically enough to impact someone's back pocket."

This is simply not true. Corporate tax is between 15% and 35% in the United States. [1] Given the enormous level of consumer spending, even a tiny reduction in the prices of consumer goods would dramatically affect people"s back pockets. Competition does drive down prices, but the lowest possible price is made higher by the corporate tax. If a profit margin is too low, investors are not interested in starting new companies or investing in existing ones. Also, if corporate tax were abolished suddenly, it is very likely that many CEOs would keep dividends at present levels, (levels shareholders are already happy with) and use the extra income to reinvest, pay workers more or lower prices. (Companies would have an incentive to do this to attract customers) For years under the direction of Steve Jobs, Apple paid no dividends to owners of Apple stock. However, even in what I think my opponent would consider the worst case scenario, the absurdly unlikely situation that prices would not be lowered and wages would not be raised, Americans would see 15 to 35% increases in their retirement portfolios. Those worried that increased corporate profits would dramatically enrich the already wealthy could propose a similarly dramatic increase in the top marginal tax rate.

4."Furthermore, the United States is in a chaotic fiscal climate. While debt and deficit continues to restrict the ability of the United States Government to deliver various services in a climate of fiscal austerity, the removal of a major revenue raiser would only further impact the budget. If the government, like you suggested, were to instead raise income taxes and abolish/lower corporate tax, this would have a direct impact on the American middle class, through additional taxation."

First, it is entirely possible to raise the tax rate on the rich but not on the middle class. But more importantly, my opponent ignores the fact that corporations receive nearly all of their income from the poor and middle class in the first place.

The idea that abolishing the corporate tax will lead to class problems is ridiculous. When middle class people own stock in a corporation, and middle class people spend money buying things from that corporation, after paying workers (mostly middle class) the money is returned to the middle class stock holders. Thus, no money has left the middle class. When rich people own stock in a corporation, money is transferred from the middle class to the rich, but this can easily be offset by taxing the rich. A higher income tax rate on the rich directly burdens only the rich. The corporate tax burdens the rich, but also burdens middle class shareholders and consumers, and also creates unnecessary paperwork.

5."Also, I agree that not all corporations are large, wealthy multinationals. The law and the US tax code recognizes this. In the United States, there are many different types of business ownership/entities, which are recognized under federal and state law. For example, a small business in Wyoming classified as a sole proprietorship would be taxed differently to a multinational corporation based on Wall Street. The corporate tax system is flexible in that respect, and larger more affluent corporations are taxed higher than smaller businesses."

First, a sole proprietorship is not a corporation. The corporate tax applies only to corporations, not sole proprietorships or partnerships. This illustrates another of the corporate tax"s shortcomings. The (single) owner of a sole proprietorship that makes $100,000 per year will pay a different tax rate than a person who owns 50% of a corporation that makes $200,000 per year, despite the fact that their shares of their businesses" incomes are exactly the same. In fact, in nearly all jurisdictions, the owner of a $100,000 per year sole proprietorship will pay a LOWER tax rate than someone who owns 1% of a $200,000 per year corporation, because the corporate tax is higher than the tax on sole proprietorships. This is obviously a grossly unfair arrangement, and it is the inevitable result of having a separate tax on corporations.

1 http://en.wikipedia.org...
AdamCass

Con

I shall now refute a number of my opponents arguments and make a number of other points which I missed earlier.

(1)"First, one foolish policy does not justify another, so if corporate personhood is a foolish policy, and it is the justification for corporate tax, the solution is not to keep both, but to get rid of both."

Again, on the issue of corporate personhood, what you fail to take into consideration is an important aspect of corporatism, limited liability. This is a fundamental aspect of a corporation's legal structure in order to protect investors and shareholders. However, because a corporation has such an inalienable right, it must have some means of social accountability. Because corporations can as a collective deal with lawsuits, and allow shareholders to dump debt on to society when they are unable to account for their own. I'm not suggesting this is a foolish policy because it carries many economic benefits, but corporations must pay for such a privilege and be accountable to society as a COLLECTIVE.

(2) "It makes sense that a corporation would have the right to "use" the roads, because what this means is that the owners of a corporation have the right to employ somebody to use the roads. Since all the owners of the corporation and the employees all have the right to use the roads, it makes sense that they still have this right when they call their arrangement a "corporation"."

Certainly individuals have such rights to use the roads and infrastructure provided by tax payers, however what this argument doesn't take into account is the additional burden placed on such infrastructure and government works by corporate and/or industrial operations. Individual people are unable to utilize such infrastructure to the overwhelming extent as corporations. Corporate entities increase the number of heavy transportation vehicles, more significantly contribute to environmental impact (practically entirely), utilize government services more strenuously and ultimately account for the necessity for additional public infrastructure when construction new shopping centers, manufacturing plants, offices etc. Ultimately, the individual corporation accounts for an increase in the need for localized government expenditure, therefore it is logical to require the corporation, rather than individuals from elsewhere, to pay for such a project. This similarly takes place in State and Local jurisdictions through income tax, with regard to education and infrastructure among many other practical government works, so that the local government is using local taxation revenue to provide local services. Ultimately, individuals are unable to account for the overwhelming usage of government works as a large, collective organisation, of which should as a whole be taxed for such use.

(3) "To summarize, all of the public services currently funded by the corporate tax could receive the EXACT SAME AMOUNT OF FUNDING, AT LESS HARM TO THE ECONOMY, if the corporate tax were abolished and replaced with a better method of raising revenue."

Well, this is ultimately false. You mentioned previously that as a means of replacing the corporation tax, income taxation on the wealthy should be increased, with supposedly 'less harm to the economy'. But there are a number of issues with this. Firstly, members of the upper class and the upper-middle class are the biggest spenders in the United States. To increase income tax on these classes would thwart spending in retail, on housing and other goods and services, which would ultimately damage the economy equally or to a greater extent than a corporate tax.

It's a logical fallacy to assume that removing the corporate tax would 'have less harm to economy' if replaced by an income tax, because in terms of the fiscal side of things, it would carry similar consequences to the economy and raise a similar amount of revenue. What makes the corporate tax more important and thus more preferable to an increase in the income tax is ultimately the need to make such large and powerful groups of collective citizens accountable to the government and for their actions, and ensuring they have collective societal accountability due to the privileges legally granted to them.

By abolishing the corporation tax, what you will find is that tax evasion would be come increasingly easier. Wealthy individuals would increasingly reclassify their earnings as 'corporate income', and thus escaping income taxation (of which you propose to increase). Such a process would be unbelievably easy considering our current tax code, and ultimately profits would be able to be shifted offshore and through tax escape strategies, of which modern businesses today excel at. While it is a very much circumstantial argument, thousands of businesses and individuals devote a substantial amount of time and effort to seek out ways to pay less tax, and the removal of the corporate tax will tax evasion much easier.

You will find also, that corporate taxation works as an effective means of dispersing the wealth of corporate ventures more effectively. If a corporation were to commence operations in Zambia, a corporate tax would funnel revenue into the Zambian government from the bank accounts of investors in the United States. Likewise, such a process takes place throughout US states with corporate taxes run by the states. With finances being funneled from investors in California to the people of North Dakota, through such means of taxation, it is an effective means of spreading the wealth geographically. Without the corporate tax, there would be increase in disparity between the states, and many states would find themselves being exploited for their natural resources, but the wealth returning to people of other states. That's simply not fair, and yet another reason why corporate tax should not go.
Debate Round No. 3
Victorian

Pro

1. I would argue that limited liability does not have as many economic benefits as usually claimed, and that it is a terrible idea, and should be done away with, but that's a debate for another day. The fact that corporations can deal with lawsuits is not relevant because individual citizens have that same right. However, my opponent is correct that investors (shareholders) can protect themselves from personal bankruptcy and I understand his arguing that they should pay for this protection. My response to this is that no one should be able to dump their debt on society, and also that allowing people to pay their way out of legal responsibility is a questionable moral area that smacks of bribery.

2. "Individual people are unable to utilize such infrastructure to the overwhelming extent as corporations."

This is not true. Again, corporations are made up of individual people. If one thousand people are able to do something as a corporation then they can do the same thing when they do not legally register as a corporation. A small business that owns a dump truck places a much smaller burden on roads and bridges than a corporation with 500 dump trucks, but 500 small businesses each with one dump truck is identical to the corporation.

3. "[corporations] ultimately account for the necessity for additional public infrastructure when construction new shopping centers, manufacturing plants, offices etc."

I am unaware of any shopping centers, manufacturing plants, or offices that are built for corporations by the government. If this actually occurs then it is a horrendous overreach of government and should be ended immediately.

4. "Well, this [my claim that public services could receive the same amount of funding at less harm to the economy] is ultimately false. You mentioned previously that as a means of replacing the corporation tax, income taxation on the wealthy should be increased, with supposedly 'less harm to the economy'. But there are a number of issues with this. Firstly, members of the upper class and the upper-middle class are the biggest spenders in the United States."

MY OPPONENT OVERLOOKS THE FACT THAT THE UPPER AND UPPER MIDDLE CLASS ARE ALREADY PAYING THIS AMOUNT OF TAX THROUGH THE CORPORATE TAX. They receive lower dividends because the profits of corporations are heavily taxed by government. Eliminating the corporate tax and replacing it with a higher top MARGINAL income tax rate would cause the upper and upper middle class to receive higher dividends from their investments (including mutual funds) and they would then have to pay higher taxes on these earnings. The net effect could easily be a small positive gain for the upper and upper middle class. Eliminating the corporate tax is appealing not because it necessarily changes the amount of money that people pay in tax, but that it simplifies the tax code. A simpler tax code decreases the amount of time spent on filing taxes. Simpler tax codes are also more difficult to evade.

5. "What makes the corporate tax more important and thus more preferable to an increase in the income tax is ultimately the need to make such large and powerful groups of collective citizens accountable to the government and for their actions, and ensuring they have collective societal accountability due to the privileges legally granted to them."

My opponent argued earlier in this round that the point of having corporations was that they would NOT be accountable for their actions, and that this "carries many economic benefits."

If these powerful groups of people are to be held accountable for their actions, then the government should stop granting them limited liability. If limited liability is done away with, my opponent's argument is no longer valid.

"By abolishing the corporation tax, what you will find is that tax evasion would be come (sic) increasingly easier. Wealthy individuals would increasingly reclassify their earnings as 'corporate income', and thus escaping income taxation."

Fortunately, this would not be a problem. Wealthy individuals could classify their income as corporate income all they liked, but under current tax laws as soon as they took that money out to purchase something for themselves, it would be counted as income and subject to income tax. Under current law, they would face felony charges if they were to spend the corporation"s money on themselves. Thus, tax evasion would not be easier. In fact, it would probably be more difficult because simplifying the tax code would close countless loopholes.

"With finances being funneled from investors in California to the people of North Dakota, through such means of taxation, it is an effective means of spreading the wealth geographically. Without the corporate tax, there would be increase in disparity between the states."

There are vastly more people in California than North Dakota. We would hope that there would be an enormous wealth disparity between the states.

"and many states would find themselves being exploited for their natural resources, but the wealth returning to people of other states."

The term "exploited"" is too vague and undefined for me to fully understand what my opponent fears would happen. States that wanted a share of the profit from its natural resources could implement a tax on natural resources.

Thank you. Please Vote Pro.
AdamCass

Con

1) "I would argue that limited liability does not have as many economic benefits as usually claimed, and that it is a terrible idea, and should be done away with..."

Limited liability is fundamentally important for a corporation to operate effectively. It has become apparent to me that my opponent, while claiming he wishes to 'help corporations thrive' wants to strip them of all of their privileges, which ironically would cause greater damage to them than the corporate tax ever could. I wholeheartedly agree that there should appropriate regulation of corporations to ensure that they are socially accountable, and the corporate tax DOES THAT. On one hand my opponent wants to 'free up' corporations by removing the corporate tax, yet on the other hand he wants to axe many of the fundamental aspect of corporatism, which would be far more devastating to the economy than the maintenance of such a tax.

2) " Again, corporations are made up of individual people. If one thousand people are able to do something as a corporation then they can do the same thing when they do not legally register as a corporation."

This is a logical fallacy. Such a process, of loosely tied individuals operating on a large scale without being incorporated, is very rare. Almost all operations of such a scale, with such an impact on infrastructure, can only be achieved with the systems in place with business structure, of which are obtained through incorporation. To your example of the 'dump truck' business, what you fail to recognize is that 500 businesses with 1 dump truck each would NOT BE LOCATED IN THE SAME PLACE. A corporation with 500 dump trucks would be placed in the same location, collectively. Therefore, it creates a localized strain on the infrastructure. Again, your hypothetical example fails.

3) "I am unaware of any shopping centers, manufacturing plants, or offices that are built for corporations by the government."

Of course the government doesn't construct the buildings, but they are typically forced to construct the infrastructure around such a venue to compensate. For example, the construction of a large stadium by a private organisation would require a revamp, and expansion, of the roads around it. The government would pay for this. This occurs everywhere, from shopping centers, to airports, to stadium, to residential estates. The governments must invest in the services surrounding a private venture, therefore further proving the necessity of the corporate tax.

4) "MY OPPONENT OVERLOOKS THE FACT THAT THE UPPER AND UPPER MIDDLE CLASS ARE ALREADY PAYING THIS AMOUNT OF TAX THROUGH THE CORPORATE TAX."

Calm down, and again that is false. You are now contradicting what you previously said, "shareholders of corporations are from upper class, middle class and the poor class". So, obviously, the Upper and Upper Middle Class are NOT paying the same amount in corporate tax. If you compensate the removal of the corporate tax with the implementation of an income tax on the wealthiest Americans, they would ultimately be paying MORE tax than before, because originally revenue raised from the corporate tax came from all classes, as you said.

5) "States that wanted a share of the profit from its natural resources could implement a tax on natural resources."

But why do this when there is a perfectly good corporation tax to raise such revenue? In makes no sense, you want to remove one taxation measure and add dozens more, which would obviously create a more complicated tax code and have a much more negative impact on the economy.

- It is inherently clear that the corporate tax is a fundamental measure of taxation. To remove it is both pointless, will harm the economy and will reduce the accountability of corporations. To suggest that somehow removing the corporate tax, and then raising the income tax elsewhere will carry economic benefits is ludicrous. Such an action would have a harsh effect on consumer spending, and would lead ultimately lead to the reduction in revenue raised by the government, because claiming income as 'corporate income' would be easy to achieve and evade taxation. My opponent's arguments have predominantly been based on logical fallacies. His desire to strengthen the economy by removing the tax is pointless when he suggests to remove corporate privileges such as personhood and limited liability.

In a nutshell, the corporate tax works, and to remove it and place other taxes is a pointless measure and would ultimately cause more issues than what it would solve.

I would like to thank Victorium for accommodating my first debate on this site! :)

Please vote Con!
Debate Round No. 4
1 comment has been posted on this debate.
Posted by AdamCass 2 years ago
AdamCass
Thank you Victorium for a good debate. It was my first, I'm still getting used to all of this.
Thanks again, and best of luck with the voting! :)
1 votes has been placed for this debate.
Vote Placed by bladerunner060 2 years ago
bladerunner060
VictorianAdamCassTied
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Total points awarded:03 
Reasons for voting decision: Pro's main problem here was taking his argument in isolation. He can't handwave away other problems by agreeing their problems but saying they're a "debate for another day". He COULD HAVE folded that into the resolution, but he DID NOT. It's a form of cherrypicking to try to ignore parts of the issue as too complicated to include in the current debate, Pro. The points Con raised seemed valid re: the structure and relation of corporations to government. Pro's main responses rested on a broader framework that, though it could be valid, isn't the framework under which corporations actually operate. As such, Pro failed to establish why, under the system in place, Corporate Tax Should be Abolished. Arguments to Con. As always, happy to clarify this RFD.