President Trump is proposing a 15% tax rate for corporations across the board, with the individual tax rate up to 35%. Why should a corporation pay a lower rate of income tax than its employees? The corporate tax rate is now 35% and the maximum individual tax rate is 39%. The Supreme Court has ruled that corporations are people and entitled to the same constitutional rights as people. So shouldn’t people be entitled to the same rights as corporations?
President Trump’s tax proposal will bury the federal government in red ink by lowering corporate taxes across the board. My proposal is revenue neutral and targets tax incentives aimed directly at manufacturing corporations that we want to keep in the United States or bring back to the US.
Mr. Trump claims that the US has the highest corporate tax rate in the world. This is not quite accurate since, although the nominal corporate rate is 35%, the actual, real-world corporate tax rate is closer to 15%. According to Americans for Tax Fairness, General Electric, Boeing, Verizon and 23 other profitable Fortune 500 firms paid no federal income taxes from 2008 to 2012. The organization also found that 288 big and profitable Fortune 500 corporations paid an average effective federal tax rate of just 19.4% from 2008 to 2012 and that profitable corporations paid US income taxes amounting to just 12.6% of worldwide income in 2010.
Concerning corporate taxes, I propose the elimination of loopholes and a corporate tax rate of 28% with a zero tax rate for manufacturing companies. I also propose a 14% tax rate for income earned overseas to bring home $2.6 trillion of profits sitting in corporate accounts offshore. I would also cap personal taxes at 28% as well, with no deductions, except the personal deduction.
Many corporations use every tax loophole to avoid paying taxes. As a part of tax reform all of these loopholes should be closed. All income should be treated the same, with one exception. The exception is income from manufacturing. Manufacturing is the industry that has moved offshore, for cheap labor and for low tax rates. Your local restaurant, dry cleaner and retail store cannot move offshore and does not need special lower tax rates: they cannot move offshore. The president’s industry, real estate investment, is built on loopholes, including depreciation. Real property does not depreciate; depreciation is a myth. Improvements and repairs to real estate should be deductible, but depreciation should not be deductible from income.
There are also more than $2.6 trillion stashed overseas by major American corporations, including Microsoft, Apple and Google. We should allow these dollars to be repatriated at a reduced rate.
Under my tax proposal, companies could bring home this $2.6 trillion pie, invest this money in new factories and businesses, and the US Treasury would reap a $360 billion bonus. This should cover the costs of the manufacturing tax of zero and then some.
I propose a 28% corporate tax rate, with a zero percent tax rate for manufacturing companies, and a onetime amnesty rate to repatriate earnings held offshore at a 14% rate.
Overall, the corporate taxes now contribute only about 10% of total federal revenues. Under my proposal, corporations will pay more money to the federal treasury and thus create more jobs. On total federal tax revenues of $3 trillion a year, corporations now contribute only about $300 billion.
Individual citizens pay the bulk of federal tax revenues. Manufacturing is the primary area where the US has lost jobs over the past 20 years. Manufacturing also creates more jobs than other businesses because it creates jobs with suppliers and service providers as well as necessary buildings and equipment.
If we lower the corporate tax rate to 28% and eliminate all loopholes (no investment tax credits, no oil depletion allowance, etc.,) we can institute a tax on manufacturers of zero percent. This would be based on the amount of US content in the products manufactured. This zero tax rate would apply only to products made with 100% US content. For example, if a manufacturer assembles a product in the United States with 50% US content, the manufacturer would pay an income tax of 50% of the 28% rate, or 14%. However, if the manufacturer has 100% US content, its tax rate would be zero.
This new tax rate would serve to incentivize manufacturers to make their products in the United States. It would help to create millions of American jobs by bringing manufacturing back to New York, Illinois, California, Ohio, Michigan and every other state.
Our current income tax structure exacerbates income inequality. Capital gains should be taxed at the same rate as salaries. Taxes should be simplified. General Electric and other profitable companies must pay their fair share of income taxes. The author proposes simplifying and rationalizing income taxes, getting rid of loopholes and deductions, and having three levels of income tax: 10%, 20% and 28%, with corporations making over $1 million paying 28% as well.
I propose exempting the first $25,000 in income from both income taxes and Social Security taxes. At the same time, I would lift the cap on Social Security taxes. Now employees earning more than $118,500 pay no further Social Security tax. If we lift the cap, it will pay for the exemption at the bottom. At the same time I am proposing that corporations do not have to pay their share of Social Security taxes for those earning under $25,000. This will encourage employers to hire more workers.
The manufacturing tax of zero and the $25,000 exception for Social Security payments will significantly increase jobs and job growth in the United States. These focused tax incentives will create more jobs, at a lower cost to the budget, than President Trump’s across-the-board tax grab for the rich.
Joel Joseph is chairman of the Made in the USA Foundation, a non-profit organization dedicated to promoting American-made products. Email joeldjoseph@gmail.com. Phone 310 MADE-USA.
From The Progressive Populist, June 1, 2017
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