Amos
01-18-2012, 03:31 PM
I like Ron Paul's idea of no income tax, but I noticed an issue with his proposed abolishment of personal income tax when applied in conjunction with his 15% corporate tax. (Current rate is 35%, this is a tax cut for corporations) My worry is that corporations could use "hollywood accounting" (Pretty much every movie, even successful ones, end up making a loss. This is why actors specify % of gross, not % of net in their contracts) to evade the corporate tax entirely.
Say for instance you have a company that made $5 billion profit this year and you live in a state that has any personal income tax lower than 15% (it would be foolish to think that no state would want to serve as a tax haven) you could just pay yourself the $5 billion as income, thus causing your company to only "break even" this year, and avoid the corporate tax all together. And there would be no downside to doing this, since this would be perfectly legal.
You couldn't solve this by taxing corporations before they pay their employees because that would put most companies out of business; there are lots of companies that make less than 15% return on their capital, and most businesses' largest expense is paying their employees. One solution I could see to this would be a deduction-free income tax rate of 15% (or equal to what the corporate tax rate is, if it isn't 15%) on incomes over a certain amount. The threshold would intentionally be quite high; (say $50 million) we don't want to discourage people from creating businesses or affect small business. We just want to prevent people from evading the 15% corporate tax. A problem with that solution is that, as Ron Paul says, any federal income tax is not allowable under the constitution. (I was just throwing my solution out there. I'm sure Ron Paul or someone else could come up with a better one. I'm just a carpenter in school to be an engineer, and engy math is different from financial math)
To reiterate, here's what I'm saying is the issue:
Ron Paul's plan calls for
15% corporate tax
0% income tax
That's what he's planning on running the federal government on for the most part. But if he does that what he'll really get is
0% effective corporate tax
0% income tax
Sure the states can levy income tax but that money doesn't go to the federal government. Without having any income tax at all you could just pay yourself $5 billion dollars as a salary and thus avoid any tax. (There's no problem with someone paying themselves $5 billion, but if they're doing it to ensure the company pays no tax then that's abusing the system) Ron Paul is already cutting federal spending and federal taxation by orders of magnitude larger than any other candidate. But if the federal government doesn't have any revenue (or at least a vastly smaller revenue than what was expected) then it will be very difficult to pay down the debt.
I know that ideally there would be even less than a 15% corporate tax. But until the debt is paid off this will be an issue. I apologize if this issue has already been addressed previously or it is a non-issue.
That being said; GO RON PAUL 2012!!
Say for instance you have a company that made $5 billion profit this year and you live in a state that has any personal income tax lower than 15% (it would be foolish to think that no state would want to serve as a tax haven) you could just pay yourself the $5 billion as income, thus causing your company to only "break even" this year, and avoid the corporate tax all together. And there would be no downside to doing this, since this would be perfectly legal.
You couldn't solve this by taxing corporations before they pay their employees because that would put most companies out of business; there are lots of companies that make less than 15% return on their capital, and most businesses' largest expense is paying their employees. One solution I could see to this would be a deduction-free income tax rate of 15% (or equal to what the corporate tax rate is, if it isn't 15%) on incomes over a certain amount. The threshold would intentionally be quite high; (say $50 million) we don't want to discourage people from creating businesses or affect small business. We just want to prevent people from evading the 15% corporate tax. A problem with that solution is that, as Ron Paul says, any federal income tax is not allowable under the constitution. (I was just throwing my solution out there. I'm sure Ron Paul or someone else could come up with a better one. I'm just a carpenter in school to be an engineer, and engy math is different from financial math)
To reiterate, here's what I'm saying is the issue:
Ron Paul's plan calls for
15% corporate tax
0% income tax
That's what he's planning on running the federal government on for the most part. But if he does that what he'll really get is
0% effective corporate tax
0% income tax
Sure the states can levy income tax but that money doesn't go to the federal government. Without having any income tax at all you could just pay yourself $5 billion dollars as a salary and thus avoid any tax. (There's no problem with someone paying themselves $5 billion, but if they're doing it to ensure the company pays no tax then that's abusing the system) Ron Paul is already cutting federal spending and federal taxation by orders of magnitude larger than any other candidate. But if the federal government doesn't have any revenue (or at least a vastly smaller revenue than what was expected) then it will be very difficult to pay down the debt.
I know that ideally there would be even less than a 15% corporate tax. But until the debt is paid off this will be an issue. I apologize if this issue has already been addressed previously or it is a non-issue.
That being said; GO RON PAUL 2012!!