Issue 40 My Ideal Business Tax March 25,2013

Well, here I go again talking about reform. But the fact is the more people discuss ideas the better those ideas can be vetted and thus become superior to the original.

In this issue I tell of my ideal business tax (although I would prefer no business taxes to exist in the first place), so lets get started.

It must be flat: My ideal business tax must be a type of flat tax. All businesses would be taxed at the same rate no matter how large or small. This will create an even playing field for all businesses as they will all be treated equal.

There investments must not be taxed: When a business invests in the stock market it is so its own business can grow and expand. The more money invested, the better off that business will be. In addition it will aid the overall stock market in growth and aid in a market recovery faster if the market should go down. Presidents Coolidge, President Kennedy, President Reagan and President Clinton all decreased taxes on the stock market and saw an economic growth spurt, so allowing businesses to go untaxed will do the same.

The Business Tax rate must be competitive: If another country has a lower business tax rate than ours, then if and when possible, our business tax rate must decrease to meet or be lower than there’s and stay that way. Businesses only stay in countries with a competitive tax rate and cheap expenses (like cheap labor). Currently the U.S. has one of the highest business taxes in the world and thus limits start up companies from forming and prevents foreign businesses from wanting to come to the U.S. to become U.S. businesses.

Tax only the actual profit of a business: Currently most business taxes tax the total amount of money a business may earn, however that is not profit. What a business actually earns is the money minus all the expenditures. So I am going to take some ideas from both Congressman Paul Ryan and former Presidential Candidate Herman Cain. The tax on business under these two ideas combined by me would be the total earnings minus everything the business has bought (parts, materials, services etc) and minus the first $15,000 per worker (so as to make both skilled and unskilled workers cheap). So let’s use a quick life example, a furniture company. That company buys cloth for the covers, wood for the frames of the couches and chairs they make. From there they sell that couch or chair at 10% more of what it costs them to build the item plus a little more to accommodate the tax rate (flexible depending on how much profit they need, and the fact is the consumer pays the business tax through our spending). And it is that simple. Buying and selling records are used to confirm how much tax is paid. But, I include workers salaries and services the business procures. So the business would subtract from that total $15,000 per worker, and say if the business provides healthcare, it would subtract the total cost of health care of its workers that it provides. What ever is left over is what is taxed.  This is simpler than the current system as it forces businesses to hold records beyond buying and selling records that increase just the costs of figuring out how much taxes they will have to pay.  My ideal system uses paperwork that businesses already have without the extra mandates by the IRS.

Collection must be at regular intervals: To ensure a steady stream of revenue, this business tax must be collected at regular intervals that businesses can plan around.  The best bet would be to collect the tax four times a year.

 

Conclusion: Business taxes are a scourge as they do not actually help anyone. Sure it aids in collecting revenue, but it is used as a weapon to keep competing businesses from threatening the power of bigger more established businesses.  It is in truth a form of legal corruption.  This form of income taxation also allows politicians to raise taxes on the public at large without directly taxing them. Basically, it makes your local businesses and big businesses the tax collector.  These are the reasons I would prefer to be rid of such taxes, but as politicians would prefer to keep their safety net for when they need to raise taxes, this is the best alternative.