Trump’s Tax Plan

We need to change our country’s tax code

“If corporate profits are at an all-time high, why are corporate taxes near a 60-year low?”

The Atlantic, Derek Thompson, May, 2013



The entire country — and all the wonderful and decent people living in it — is dependent upon a fair, logical, and productive Federal Tax Code. President Trump knows this and is writing a new plan for the country right now. Here is an example of a plan he MAY use.

The tax code should spread the burden evenly, whilst collecting the necessary means to accomplish the legal and agreed upon goals of society. It should be specifically structured as to accommodate and encourage business activity to the greatest extent possible. The President knows our existing system does not encourage growth, rather discourages it, and that must change.

As Marylanders we have a right to demand such a tax structure since the federal tax code has enormous downstream revenue implications and ramifications concerning the final amount of revenue we collect here in the great state of Maryland. Maryland, as many of you know, is known as the nation in miniature, a label we bear proudly. For decades now, unfortunately, the archaic and arbitrary Federal corporate tax structure has left us not only with far fewer corporate tax dollars flowing toward the federal treasury, but of course, far fewer dollars to all it’s downstream tributaries, like the Maryland Treasury.

How big a problem is this?

Thirty years ago, three in every ten dollars collected by the Treasury came from the corporate income tax, today that number is one in nine. If it were still three out ten, instead of collecting $250 Billion from the corporations, we (the US Treasury) would be collecting $750 Billion. Although the math is simple, the implications are staggering.

The Federal Treasury has been slowly, deliberately, (sometimes not deliberately), choked off from this revenue by a myriad of tax loopholes, and other structural problems, which all have cumulatively resulted in less and less corporate profits going toward our vital national priorities.

Simultaneous to this precipitous drop in their collective tax responsibility, these corporations were able to maintain their profit margins at 12 % of corporate revenue. President Trump has specifically pointed to this problem and although he received such benefits as his businesses himself, he does not want this practice continued.

We the people, the American people, lost out, the entire country lost out, that’s the only word for it, on nearly $500 billion a year, for more than 30 years now. That’s right, this isn’t just yesterday’s trend; it’s a long-standing erosion of trillions of dollars that is slowly strangling the federal government and all 50 states that depend, to a greater and lesser degree, upon the federal government.

If this initiative, my new corporate tax plan, or one like it authored by Trump, were to succeed, it would mean trillions in total economic opportunity for the country. Wall Street is going bonkers because they know unleashing this profit motive will ignite growth everywhere.

The previous trend, the one Trump is attempting to set right, has robbed our national treasury for TWO dollars out of every TEN dollars, or a total of twenty percent of our total tax revenue — each and every year for decades on end now. That’s money the Feds should have collected if we had simply maintained the status quo and continued to tax our corporations at the rates we did prior to the 1980’s.

This is a horrible trend – One that Trump is committed to reversing. And believe it or not, I actually don’t think he will have any substantive resistance to this proposal. The reason for this is simple, the existing tax code is so arbitrary, so counter intuitive, so riddled with corruption and loopholes, and all of this is on view for the government, the corporations and the American people. Sometimes when things really stink, that becomes an opportunity. In this case, what we have today, right here in America, is an amazing opportunity, sitting here before us, just waiting to be taken advantage of.

“We are in favor of comprehensive tax reform…we are not happy with anything that raises the rate for us.” National Federation of Independent Business

With 350,000 member businesses

Chris Whitcomb, spokesperson, May, 2013

An amazing coalition of people want the corporate tax code changed — from both political parties, in fact, even from the far right and left corners of both sides of the aisle — AND the leadership ranks of most of the Fortune 500 companies — as well as many other leading economists, again, from both sides of the ideological divide.

“Some of the biggest and most powerful companies in the United States are fighting for a cut in the official corporate tax rate, arguing that it is necessary to allow them to compete more effectively in the global market.” New York Times, May 24, 2013

All of these people, all of them, as well as a great majority of the American people, agree on some or all of the core principles concerning the need to reform this country’s tax code, specifically the corporate tax code. We need to do this because our corporate tax system, as it stands, is massively deceptive, and this deception, is, in my opinion and Trump’s although I don’t have his numbers, responsible for a trillion dollars in lost opportunity to the U.S. economy.

Just how bad is the deception and what does it constitute?

“The insane U.S. tax code…the United States currently has the world’s highest corporate tax rate – 35 percent, but hardly any company pays that rate. There are any number of loopholes, credits and deductions that companies can take advantage of to reduce their effective rates.” NewsAdvance, May, 2013

Our nominal top rate corporate tax rate is 35%. If that sounds high to you, it should, it is the highest nominal corporate tax rate for developed countries, in the world today. The effective rate, meaning what the government actually collects however, — is only 13% from the really big corporations, and only 20% (of declared profit!) on all corporations collectively.

“The 35 percent rate, for instance, could easily be dropped to the mid 20’s, or lower, without any loss to the Treasury, simply by closing loopholes.”

USA Editorial Board — May 23, 2013

This is really crazy and Trump understands this. It’s so upside down, it strains our belief in the whole system. Why would any country advertise to the world’s corporate boardrooms and leaders, a ruinous corporate tax rate like 35%, and then allow the real rate, the rate actually paid by corporations, to get all the way down to 20%, 13% and even zero percent, for some of the country’s largest businesses?

We don’t have to continue on this path, we can revitalize our growth rate and simultaneously lower our long-term debt problem by simply reversing this trend. This is a critical point, since leveling the playing field will stimulate growth, the economy won’t even have to pay a growth penalty for all this extra tax collection money/dividend. Tax certainty, increased money velocity and unburdening the profit category should collectively add 2 to 3 points of GDP growth to the entire economy, all by themselves, year after year.

Remarkably, because of how out of balance the system has become, a new rate, based on revenue and not profit, will lower most corporations total tax burden, while also generating more revenue for the federal treasury.

This is even obvious after accounting for all of the; tax credits, targeted tax breaks, pass-through corporations, a massive web of loopholes, the proliferation of non-profits, and a slew of other tax schemes like Irish Sandwich foreign subsidiaries, that ostensibly sell trillions of dollars worth of goods in places like Luxembourg and the Cayman Islands, where the profits are “parked” for years and even decades, corporations, particularly big ones, have corrupted the total rate they pay, what they actually pay in taxes, down to a historic low.

All the while, small medium and even some large corporations have been over-paying a ruinously high nominal rate, to make up the difference.

Nobody wins in the current system, even the very large corporations hate our tax system, and must act like contortionist’s each year while attempting to plan on total tax liabilities that depend more upon legal maneuvering, and lobbying, than on the financial fundamentals that should be the basis of their obligation to the rest of society. Some of them, like G.E., have gotten really good at it. I’m not picking on one corporation – please note that – many of the big corporations devote a lot of time, energy, money and business modeling based upon their ultimate tax strategy.

To compete in a sophisticated world economy today, these corporations have an obligation to their shareholders to maximize those tax reducing opportunities. Nevertheless, many of these companies like G.E., might have taken this obligation to the limits of what is also healthy for the country.

“G.E.’s strategies let it avoid taxes altogether. The company reported worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States. It’s American tax bill? None. In fact, G.E. claimed a tax credit of $3.2 billion. It’s extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate it’s profits offshore.”

The New York Times — David Kocieniewski, May 24, 2013

According to a study done by Citizens for Tax Justice on Fortune 500 companies; a quarter of the F500 companies paid an effective tax rate of less than 10 percent and 30 huge corporations – including General Electric, DuPont, Verizon, Boeing and Wells Fargo – paid nothing, or less, (credits for future years) over the entire three years covered by the study. This is important because these big companies are such a huge piece of the economy.

The only real economic measure of something – anything — is to look at in comparison to GDP – and as you can see, more clearly than I or Trump can describe, is that corporate profits, as a percentage of GDP, have held steady since the end of WWII, in the 8 to 12 percent range, of total GDP (Today they are at the very high end of that range, in the 12 percent area to be exact), while corporate income taxes have taken a long, slow, gradual descent from 6 percent of GDP, to less than 2 percent, where they bottomed in the early 1980’s. In other words, corporate profits are up by a third and the taxes they are paying have declined by two-thirds.

Sound ridiculous? It is. But it’s true. Ronald Reagan also thought it was ridiculous and he did something about it. I am counting on Trump to do a Reagan and get this done.

“In the mid-1980’s, President Ronald Reagan overhauled the tax system after learning that G.E. – a company for which he had worked as a commercial pitchman – was among dozens of corporations that used accounting gamesmanship to avoid paying any taxes.

“I didn’t realize things had gotten that far out of line,” Mr. Reagan told the Treasury secretary, Donald T. Regan, according to Mr. Regan’s 1988 memoir. The president supported a change that closed loopholes and required G.E. to pay a far higher effective rate, up to 32.5 percent.” — The New York Times

Some changes President Reagan made actually started the amount collected by the Treasury, as measured against GDP, to begin climbing again, back up towards the 3% minimum threshold, as you can see in the graph behind me, but time and the relentless effort of the corporate lobbyists and lawyers paid off, and those return rates have fallen back down around their all time low, 2%, where they are still stuck today.

Expressed another way, collected corporate income tax used to make up 1/3, of the money collected by the Treasury. They used to get three in ten dollars from corporate taxes, and now they get one. Two in ten dollars, lost, forever, from the coffers of our national treasury, each and every year, for decades now. And these corporations paying these much lower taxes aren’t celebrating, they are as anxious for reform as the public, should be.

The hidden payoff in this new plan, the bigger one actually, is a stronger economy. This current corporate tax system isn’t just a PR failure, making us look expensive to the world’s business community, it is also badly damaging to our national productivity, and that is where we are sacrificing a trillion dollars a year in lost GDP growth.

“While G.E.’s declining tax rates have bolstered profits and helped the company continue paying dividends to shareholders during the economic downturn, some tax experts question what taxpayers are getting in return. Since 2002, the company has eliminated a fifth of its work force in the United States while increasing overseas employment. In that time, G.E.’s accumulated offshore profits have risen to $92 billion from $15 billion.” — The New York Times

Our existing corporate tax structure is counter-intuitive and that fact is hurting everybody. Ronald Reagan knew it. Bill Clinton knew it. Both of these men were very intelligent, and, both of them, against the pressure of longtime friendships and influence, both in terms of power and money, went against the grain and tried to fix this problem. But just increasing and/or decreasing the nominal or ostensible corporate rate won’t bring in more revenue, because the big corporations have so many loopholes set up, they don’t pay anywhere near the nominal or ostensible rate.

This problem actually presents Trump with a great opportunity; we can lower the top corporate tax rate for most American businesses and simultaneously raise federal tax revenue. I think we should do the honest thing — lower the rate – but in a way that will generate more total revenue to the U.S. Treasury. Both of these great presidents actually caused actual corporate tax totals to increase and both of them saw the economy turn up as a result. This is not about left of right; it’s about right or wrong.

“Our tax system should encourage job creation and investment in America and end these tax incentives for exporting jobs and dodging responsibility for the cost of securing our country.” – Lloyd Doggett, D, Texas

The American people need to understand that this issue touches every single one of them. They are the big losers if we do nothing. The combined state and federal governments just appear to be the biggest loser’s of all, because of all this lost revenue.

In reality, the overall economy is the big loser if Trump fails, which I predict he will not.. The existing oppressive tax code does widespread and pervasive damage to the growth potential of the wider economy. Even a small movement in the rate of growth in the overall economy produces huge gains for average Americans over time. This is what President Clinton knew, what President Reagan knew, it’s what anybody that operates a business knows. These are gains in economic strength that we are tossing away and cannot afford to let go to our competitors any longer than we already have.

A New Type of Tax System

The first principle of this new plan must be to:

I. Close the Corporate Tax Loopholes.

It is immoral and economically unwise, as a nation, to extend and/or create tax loophole laws, which allow multi-national companies with billions in revenue, billions in profits, and trillions in assets, to pay such a small share of the nation’s tax burden.

Having said that, I also want to stress that the corporations are not the enemy, even the very aggressive ones like G.E., and while it may look like they have rigged the system to benefit themselves, and that if we simply fix the loopholes, a bunch of new revenue will stream in, this, unfortunately, this is not the case. People and companies must obey laws, but the economy does not, it literally has a mind of it’s own. And just because a law is designed to bring in more revenue, doesn’t mean it will, and in fact, they almost never do.

Humans are clever, adaptive, therefore, hard to tax. This paradox is inherent in human nature. People are very persistent and clever; if you tax something they worship, like profit, they won’t actually stop making it, they’ll just change their habits, their corporate structures, where they manufacture their products, who they employ, who they borrow capital from, and even what country they choose to live in, based upon a shifting calculus of where they can make the most money and keep it.

More laws, more bureaucracies, and more oversight capability, just give the corporate tax finaglers more opportunities to lobby, bribe, influence, intimidate, and contribute, contribute, and contribute more to the congress men and women writing these rules. Both sides of the aisle have been complicit in this behavior for decades, through periods of dominant party leadership of the House and Senate, on either side of the aisle. Finger pointing will only continue to deepen this issue.

In other words, it just gets worse if we bicker, then the corporations win for sure, and the people lose for sure. We have a lot of evidence, amassed over many decades now, that the lobbyists and CEO’s in the corporate tax avoidance world will not be denied, and that no single political crusader or even one of the two dominant political parties, can or will undo the work of thousands of lawyers, lobbyists and politicians who were influenced by them.

“Cracking down on offshore profit-shifting by financial companies like G.E. was one of the important achievements of President Reagan’s 1986 Tax Reform Act,” said Robert S, McIntyre, director of the liberal group Citizens for Tax Justice, who played a key role in those changes. “The fact that Congress was snookered into undermining that reform at the behest of companies like G.E. is an insult not just to Reagan, but to all the ordinary American taxpayers who have to foot the bill for G.E.’s rampant tax sheltering.”

The New York Times

David Kocieniewski, May 24, 2013

All of this load, or friction, directly on the profit wheel of these corporations, as a method of collection, has failed, and failed miserably. Trump knows this as a business man and he is committed to bringing sanity to this mess. Part of the problem is the yardstick the government chooses to use to calculate the tax, namely, profit. Profit is the one-thing corporations, naturally, will do anything to effectively protect, through a series of counter-actions, by an army of accountants, lawyers, lobbyists, PR guys, and associations. All of these forces combined, eventually conspire to make the government less efficient at finding, calculating and getting all the tax revenue it is entitled to by law.

Just how bad is it? There are nineteen American companies, (their names and revenue numbers are scrolling up behind me, (gesture) on the NYSE, that each have over $100 billion a year in Revenue/sales. All of these companies pay little or no corporate income tax and some of them haven’t paid a cent for multiple years. Under the tax proposal outlined here today, the $3.3 Trillion dollars in collective revenue/sales these companies turn over each year would be taxed at the minimal rate of 3%.

This one simple step, regardless of whether the army of accounts, lobbyists, lawyers, and CEO’s ever agree there was any profit at any of these companies or not—would generate $100 billion a year for the Treasury. Using our baseline of 2009, where the net collected by the Treasury was only $225 Billion, this is a glimpse at how radically this new tax system could lower taxes on the majority of companies, while simply making the gigantic ones which have been riding free — pay their fair share — and the government still gets more total revenue. More revenue, less taxes for the majority of companies and a 33% tax cut for every single small and medium sized business.

Overall, after adding in the small profit tax ($15-20 Billion annually) the plan would tax these giants in the over $100 Billion category at a net rate of 4%, or $120 to $130 Billion in collected taxes from $3.3 Trillion in gross sales/revenues. Most of this would be new revenue, maybe as much $68 to $100 Billion.

Add to that, this next category, the Non-Profits, which although the corporations in it will only pay 1.5% of gross revenues, again will increase Treasury revenues substantially, by as much as another $20 Billion annually. This number is high because right now, the Treasury gets nothing from these enterprises. Every dollar gained by adding this category is all to the positive. This category is necessary, because our current system only taxes profit — therefore, over time, a greater and greater percentage of organizations/enterprises/companies get organized as non-profits, in fact virtually every one now, that can justify it anyway, does so.

The explosive growth of non-profits is also damaging the treasury; this is another trend that has snuck up on us gradually, over many decades. Lately however, the incredible growth rate growth of non-profits is a perfect example of one of the negative, unintended consequences of the way we tax corporations on profit, not revenue — revenue is a much better indicator of total economic activity.

These unintended consequences are our own fault. We must do a better job of accounting for the moral hazard side of human nature when we construct these future tax systems. And one quick lesson is that Revenue/Sales is what counts, since these non-profits make up nearly 10% of the entire economy BUT earn NO profit. And, of course, therefore, pay no corporate income tax.

“The non-profit sector has been growing steadily, both in size and financial impact, for more than a decade. Between 2001 and 2011, the number of non-profits had increased 25 percent from 1,259,764 million to 1,574,674 million today.

The growth rate of the nonprofit sector has surpassed the rate of both the business and government sectors. In 2010, non-profits contributed products and services that added $779 billion to the nations gross domestic product; 5.4 percent of GDP. Nonprofits are also a major employer, accounting for 9 percent of the economy’s wages, and over 10 percent of jobs in 2009.”

Source: The Urban Institute

Let me expand on this example, because it isn’t so obvious, but can have an insidious effect on society. On the surface, the growth of non-profits appears to be a good thing. They run hospitals, charities, do the dirty work. But that’s not all they do, and even if it were, it would still be a problem. The NFL is a multi-billion dollar business entity, organized as a non-profit, that doesn’t pay a single penny of corporate income tax.

As you can see from the Urban Institute’s own numbers, the growth of this sector of the economy has outpaced both the regular economy and the government. That means one in ten American workers, works for a specially designated non-profit company or organization — that by definition — pay no corporate income tax. That number is already a disaster for the economy, but I tell you, if we don’t fix the tax code, it will get worse.

Imagine a world, where non-profits do just twice what they are currently doing in the economy. That would mean that 20 percent of the people going to work in the economy everyday – would be working for organizations that didn’t financially contribute to the national treasury– like the for-profit corporations the other 80% work for — do. On the surface this may look rosy, all that good social work being done, but consider the underlying effect on all the other parts of the economy.

All those non-profit employees would get paid, of course. A lot of good work would be done by them, undoubtedly, a lot of cars driven, planes flown on, food consumed, people who have educations would use them at work everyday in their non-profit organizations – BUT – there would be NO federal tax revenue from those corporations, no tax revenue to fix those roads they used everyday, no money to monitor that air traffic while they fly around, and no revenue, none at all, to keep those universities where they studied – open.

And of course, even non-profits require military protection, day and night, in every ocean and over every section of sky. Protection paid for by the other American taxpayers/corporations — if these corporations don’t pony it up.

A Tax System that Doesn’t Spread the Load, Collapses

As it is, only the for-profit entities are paying for all of that necessary stuff that everybody uses, every single day. That’s right, since non-profits don’t pay corporate income taxes, which are solely based upon profit—they function in our economy, without contributing to its basic upkeep or defense. For that reason alone, the entire way our corporate tax code is structured should be changed.

Before you conclude I’m picking on non-profits, think about this, it doesn’t make any more sense to blame the not for-profit corporations for the current state of the situation than it would to blame the profit motivated ones.

I repeat, this is the government’s fault and the government needs to fix it with the second principle of my new plan.

Trump can give the U.S. a new, fairer, taxation system — based upon gross revenue/sales and profit — not profit alone. There are three important principles, fused together in that statement — and they are all of equal importance.

All corporations should pay their fair share, big and small, For-profit or not, without exception. One reason they currently don’t is our laws and tax policies actually discourage the production of profit, by concentrating our taxing attention on profit, not revenue.

Measuring Profit is a Big Part of the Problem

So, these corporations hide their profits, sometimes in other countries, sometimes in shell companies, trusts, lease deals, lease-back deals, non-profit corporate structures, the list goes on and on. We need to stop this game, shine the light on all this, and clean it up. No more “chicken poop” credits, (Section 45, according to The Joint Committee on taxation, this is a $9.7 billion item over 5 years). No more Irish sandwiches and foreign subsidiary credits, no one knows for sure, but this is probably a $45 billion item per year.

No more “domestic manufacturing deduction,” this one is the scam of the century, today, under our existing code, grinding coffee and making hamburgers are considered manufacturing, provided they are done substantially in the U.S. The tax code by the way, despite all logic and even a glance at the dictionary, defines substantial as 20%. I’m not making that up. This loophole alone is a $20 billion item per year. Any attempt to undo these loopholes, one at a time, would backfire, and in all likelihood, create more places for the corporate revenue to escape, and U.S. treasury tax yields would simply continue to decline, as would all the derivative revenue streams such as the individual state’s share of that total.

Experience has taught us, the corporate lawyers, lobbyists and contributors would win, exerting pressure here, a loophole there, a carefully worded definition over there, and in the end, there will never be a good way to wade into this nest of loopholes, one by one. Next to this mess, the Aegean stables looked clean. To clean this up, we need to literally dry it all up — by removing the incentive to “structure” their corporate P&L statements this crazy way in the first place.

Maximizing profit is usually the number one priority of most well run corporations. Reducing their tax burden is usually priority number two or three and requires minimizing net income or profit. The number 1 and 2 priorities of the corporation shouldn’t be diametrically opposed to each other. This isn’t good for growth, for profit, for innovation, for marginal productivity, the source of all wealth. It’s easy to hide, and therefore suppress tax collection on, a trillion dollars of profit from the government — in a 25 trillion dollar revenue pile. But tax the big pile itself, the very revenue stream itself – the $25 trillion wide money stream itself and is there no place left to hide.

If we get directly at the much wider, more reliable and stable revenue stream we can charge such a very low rate, like 3%, which means a fair and relatively flat taxation system, not dependant upon profit calculations, but an open and easily monitored and measurable item, like gross revenues/sales. Right now, in California, a slightly different version of this idea is being used successfully. They’re basing a state tax on the gross revenue stream of sales generated as a percentage of business done in the state, a brilliant, small version of this idea, which is being tried, with great success. The state of California tax system change was done on purpose because the economists there recognize the same basic fact I want to take advantage of and employ here, that a look at the gross stream of business, is a more accurate measurement of the enterprises economic impact on the area, than some highly manipulated number like net income.

Trump needs to open our minds up to the idea that profit calculations are just that, calculations, but revenue reports are something else all together, they are the building blocks, the very bedrock of a financial statement, and manipulating them to effect your tax liability would not only be hard, But, with the super low tax percentages set where they are in my new tax plan, there is very little incentive for the corporation to cheat.

This proposal means an average corporate tax rate cut of 36%!

What will this mean for the average businessman or woman in America, the owners of these corporations? A big tax cut. I estimate, overall, the average medium or small business paying taxes today will pay 1/3 less, in the new system. Despite this nearly across the board tax cut, the U.S. treasury will actually collect more total revenue. How is this possible? It is because of two big factors. The first is that an important classification of corporations, which dramatically under pay today – large multi-national corporations – will finally pay their fair share.

Secondly, another whole classification of businesses, ones with high revenues and high employee counts, but no profit, will also, finally, begin to share the burden. This category will include the non-profits and the large for profit corporations/enterprises, which have a lot of revenue and employees, but little or no profit. Under this plan, although they will pay a lesser percentage, they will finally be asked to carry some of the burden as well. The following is how all this will work.

The “Trump” Tax Plan

On the bottom layer of this system is a flat tax of one point five percent (1.5%) on all corporate gross revenue, for all types of corporations, partnerships, LLC’s, 401 5c, etc,. This flat amount rises to 3% for corporations making more than 30% profit and/or whose revenue levels are higher than $1Billion annually.

This will generate a minimum of $350 Billion a year in tax receipts, all of which the treasury will get, since corporate returns from 2009 forward show a minimum of $25 Trillion in total corporate gross revenues.

This first layer is a simple, easily implemented and easily audited single step, this layer alone, will bring in more corporate tax receipts every year—than the U.S. Treasury currently collects. But this step only covers a certain class of corporations and situations. To balance the system, it must also include a secondary layer of tax, on profits. This second tax rate layer is also very low, in fact; significantly lower than most corporate taxation rates around the globe, making the country competitive globally while lowering our national debt and stimulating our economy.

The Second Layer, Profits:

A. A progressive tax of 1.5%, 5.5% and 9.5% on all corporate profits, with the percentage ascending as the profit margin does, except in the lower revenue brackets, where the rate can be as low as zero.

B. The profit tax can also be a negative number, for as much as half the revenue tax, provided ebitda is negative by at least 5% points.

C. These three stages of the profit layer tax, taken together, will generate an additional $150 Billion, for a total of $500 Billion in corporate taxation, up from the current $225 Billion.

D. Taken together, these two taxes, Layer 1 on revenue, and Layer 2 on profit, divided by gross revenue, form a ratio, the Total Economic Activity Transaction rate, or TEAT. This new metric will range from one half of one percent on the smallest, least profitable, and most vulnerable enterprises, right up to the top rate of 5.9%. This top rate is shared by all corporations above a certain revenue size, and above a certain profit level, but is still so low compared with all the other economically developed countries, it would actually give the U.S. an advantage in the international market place, allowing these Apple type corporations to move profits back home from foreign subsidiaries, at rates they have asked for. This creates a level playing field for the GE’s and the Exxon’s, but doesn’t shift their legitimate burden to the small and medium size corporations, in the process, as the current IRS code, unfortunately, does.

E. This extra revenue will make it possible for the corporate tax system to have no capital gains tax whatsoever. This will eliminate double taxation on profit, one of the great productivity killers of all time. This has been a Republican Party goal for many years now. This plan is truly bi-partisan in it’s objectives, methods, and hopefully, results, which I believe will benefit all Americans.

This is actually a simple plan, that has support in both ideological camps and among many economists, and is also one that will approximately double to triple the amount of money actually collected by the corporate taxation system.

Current IRS tax rates:

(A) 15 percent of so much of the taxable income as does not exceed $50,000,

(B) 25 percent of so much of the taxable income as exceeds $50,000 but does not exceed $75,000,

(C) 34 percent of so much of the taxable income as exceeds $75,000 but does not exceed $10,000,000, and

(D) 35 percent of so much of the taxable income as exceeds $10,000,000.

Frequently Asked Questions and Objections:

1. Some economists and mathematicians argue that ultimately, all taxes, even corporate taxes and specialized taxes, are actually borne by society at the end of the day and therefore, taxing corporations at all, is redundant, unnecessary, and inefficient, since it takes a lot of effort to coordinate, calculate and track this separate revenue center for the Federal treasury..

In other words, corporate taxes are just price increases the corporation’s pass on to the consumer. All these consumers, collectively, represent the public, the same public that ultimately carries the weight of all taxes — according to this theory.

For evenly applied taxes, this logic is very attractive, and in some narrow merchant categories like excise taxes on gasoline, it might actually be true. But this model presupposes many conditions, which do not exist in the real world.

Most proponents of this theory further hypothesize that lowering the corporate income tax to zero, would leave the burden of the cost of government — exactly where it is now, on the public at large — but without all the limitations our current tax codes complexity and stupidity impose on the business community.

Their logic is simple, eliminate this tax and the corporations will be free to make more money, hire more people, take risks, innovate, and all the other positive stuff will make the economy grow. Unfortunately the proponents of this idea only have a mathematical argument. In theory, it shouldn’t make any difference where the tax burden is imposed, as long as it’s fair, doesn’t strangle productivity and can raise sufficient revenue, it IS TRUE, that mathematically all this burden falls, ultimately, on the humans that either own those corporations; get paid dividends by them, and/or get their salaries from these corporations.

But life isn’t a chalkboard.

It’s impossible to call a tax system fair — that burdens all small and medium sized businesses (also job creators, innovators, etc.) with a 35% corporate tax rate and then give the huge corporations COMPETING with those same small and medium sized companies a tax rate of ZERO. Such a burden then is not falling equally on the public through price increases. The people owning, working for, investing in, and doing work for some of those corporations will be continuously enriched at the expense of all the people working for, investing in and competing with those corporations’.

This just further enriches, entrenches, and concentrates wealth on the same people and the companies they own and invest in like GE and Exxon. If corporate salries weren’t at such record multiples to the average workers and if the top one percent (the owners of these corporations) hadn’t gotten so dangerously rich at the expense of the middle class, it could be argued these taxes weren’t channeling wealth toward the rich.

But unfortunately the net effect on the economy has been undeniable. The corporations and the wealthy (and the poor) have all improved their economic position vis a vie GDP, while the middle class has gotten poorer, thinner and less educated. While corporations have expanded their share of GDP over those 30 years, and held on to their profit margins, they’ve become rich.

The greatest concentration of wealth in the nations history has moved out of the middle class and into the hands of the rich and the corporations they control and profit from. Fact: Corporation’s have been paying ever lower total tax amounts as a percentage of gdp for thirty straight years and income inequality, money velocity in the economy, gdp growth and family purchasing power have all declined precipitously during that same time period. Letting them pay less in total and as a percentage will SURELY only make that situation worse.

We’ve tried letting the corporations (especially the really big ones) pay nothing for decades now. It didn’t work. The public understands this, any argument that lowering this number further, to zero, will go nowhere politically.

If the tax burden were lowered to zero, (what this crazy line of thinking calls for) on this group, the people might actually revolt. The theory may sound workable on a chalkboard, but in reality, it would have no chance of working or getting passed.