The Instigator
Jack_D
Pro (for)
Tied
0 Points
The Contender
FollowJesus
Con (against)
Tied
0 Points

The U.S. Corporate income tax should be abolished

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Voting Style: Open Point System: 7 Point
Started: 6/13/2015 Category: Economics
Updated: 1 year ago Status: Post Voting Period
Viewed: 486 times Debate No: 76522
Debate Rounds (3)
Comments (6)
Votes (0)

 

Jack_D

Pro

After years of tax preparation and study of the tax system, I have concluded that the U.S. corporate tax should be abolished and replaced by a direct tax on the company's shareholders. A large body of economic literature, from Democratic economists as well as conservatives, supports my position.
FollowJesus

Con

Frankly, I find the Corporate income taxes (and any other income taxes)as a whole to be pointless as they then proceed to drive struggling small companies and large corporations down, hence forth driving down the economy of our nation. The disagreement between Pro and myself is his proposed replacement tax. A direct taxation on a companies shareholders will lower the value of a share within a company. Aside from this matter, it is also essential to recognize that not all companies that currently fall under the Corporate income tax have shareholders. My points of view are supported by conservative and liberal view points as well as several outlying party ideologies (IE Tea Party, Libertarian).
Debate Round No. 1
Jack_D

Pro

To viewers and voters: we are going to debate ,but Con is actually pro for the motion that Corporate taxes should be abolished with no substitute and I am for replacing the corporate tax with a direct tax on the shareholder's capital gains and dividends. Note: ( for S corps and other businesses,LLCs etc., with few or no shareholders, I favor taxing at the personal level, which is the current policy.)

Con's idea sounds plausible--after all, corporations just pass their taxes along to their customers, anyway, right? Not so fast. While tax reform is necessary, and the corporate tax (as most of the tax code) is far from ideal, exempting corporate income from taxation would be a bad idea for several reasons : 1. it would be regressive and unfair l(most shareholders have above average income, 2. lose revenue (I'll talk about Kansas a little later) , and 3. inefficient (provides an easy tax shelter).

Economists Joel Slemrod and Len Burman in their excellent book Taxes in America, make the case against abolition: If corporate tax were abolished then taxpayers could shift what is essentially labor income into the corporate sector and receive it free from tax --and worse, finance consumption via loans from their own corporations! Economists Alan Viard and Eric Toder, in their paper advocating replacement (but not abolition) of the corporate tax, make an important point in favor of the necessity of a corporate tax:

By taxing corporate retained earnings on which individual tax would be delayed or avoided, the
current corporate income tax serves a very important function as a backstop for the individual income
tax.

Slemrod and Burman's fear of massive revenue shifting from personal to business to avoid taxes is no longer a hypothetical. This blunder of exempting corporate income is actually taking place in Kansas. From Josh Barro, New York Times contributor:

Jim Dunning Jr., managing partner of Dunning & Associates C.P.A.s in Wichita, says he has seen a few clients change the way their businesses are incorporated to take advantage of the tax law. Many small firms are structured as S-corporations, and federal law requires an S-corporation"s owner-managers to pay themselves at least a "reasonable" salary. But by converting to a limited liability company, or L.L.C., owners can set their salaries to zero and take all of their income from the company as profits, thus avoiding any Kansas tax.

Source: http://www.nytimes.com...

Not surprisingly, Kansas has had budget shortfalls ever since. For fiscal year 2014, which ended on June 30, the state collected $330 million less in taxes than it had forecast, and $700 million less than it had collected in the prior year. Currently, Kansas has been forced to drastically cut school funding and now their Governor is calling for a sales tax increase to make up the deficit. That's not an outcome anyone should want.

For a budget shortfall to hit the U.S. government at this time, when we already have a sizable debt, would be a disaster. Right now, the corporate tax collects about $300 billion a year, which comes out to 11% of the nation's revenue. Abolishing the tax, with no replacement, would mean large cuts to health care, military spending, infrastructure, Social Security, etc. For all its flaws, it cannot simply be abolished.

A better solution is simply integrating the corporate tax with a personal tax; i.e. taxing accrued capital gains and dividends on individual returns. It is however, regrettably, politically impossible to do this. That would be seen as a massive tax increase and demagogued to a certain defeat.

I have a question for my opponent: how do you propose to make up the lost revenue, or do you propose simply conceding the lost revenue and add $300 billion or so to the national debt?

For more on this idea, see Viard and Toder Major Surgery Needed:
http://www.taxpolicycenter.org...
FollowJesus

Con

FollowJesus forfeited this round.
Debate Round No. 2
Jack_D

Pro

Jack_D forfeited this round.
FollowJesus

Con

FollowJesus forfeited this round.
Debate Round No. 3
6 comments have been posted on this debate. Showing 1 through 6 records.
Posted by Jack_D 1 year ago
Jack_D
Opponent forfeited round 2; I assume that is the end of the debate? Just starting debating here, what is protocol?
Posted by Jack_D 1 year ago
Jack_D
To viewers and voters: OK, we are going to debate , but Con is actually pro for the motion that Corporate taxes should be abolished with no substitute and I am for replacing the corporate tax with a direct tax on the shareholder's capital gains and dividends. Note: ( for S corps and other businesses,LLCs etc. wit hfew or no shareholders, I favor taxing at the personal level, which is the current policy.)
Posted by FollowJesus 1 year ago
FollowJesus
My position is that it should be abolished with no substitute. Sorry if I didnt make that clear.
Posted by Jack_D 1 year ago
Jack_D
Con,
I want to make sure I understand your position here before replying. Are you arguing that that corporate income tax should be abolished with no substitute, or you arguing that it should be taxed at the individual level, like S corps do now?
Posted by MrJosh 1 year ago
MrJosh
That's pretty much what I felt too. The title sounds absurd, but once he clarified his position, it is more than reasonable.
Posted by Contra 1 year ago
Contra
This is an interesting topic. I was going to take it, but after you said it should be replaced with the tax on shareholder income, it seems like a good idea.
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