Today I reprise ideas of prior posts regarding how the corporate income tax should be reformed, and expand on those ideas.
Corporate tax reforms
(I) eliminate the deduction for all interest expense (must be phased in over time) except for (a) banks and finance companies (as interest for them is an ordinary cost of business), (b) working capital loans secured by inventory, and (c) other loans secured by equipment or real estate. All unsecured corporate debt (in the past called debentures) is simply capital fungible with equity, hence should not be subsidized by the taxpayer. In olden times, it was called "water" in the capital structure.
This reform will eliminate many abuses: overleveraged, private equity scams, etc.
(II) tax US corporations on worldwide income - no more free ride on income in foreign lands;
(III) eliminate deductions for ANY compensation above a fixed number such as the salary of the US President;
(IV) permit expensing of all costs for machinery and equipment as paid;
(V) lower the corporate rate to equal the income tax rate for individuals (as reformed by Bunkerman);
(VI) include a big, one time small business exemption of something like $1 million that can be carried forward until used;
(VII) move all other deductions for business expenses to a cash basis - this will simplify everything and eliminate most of the games that corporations play now to reduce taxes;
(VIII) eliminate all tax preferences and tax credits for everything except foreign taxes actually paid.
That's about it. Simple and fair.
Word of the Day
"Despite" - noun usage [$10] T. S. Eliot. Archaic or literary.
Despite means (preposition) in spite of; (noun - archaic or literary) 1. outrage, injury; 2. malice, hatred (died of mere despite).
Sentence: [T. S. Eliot, Selected Prose, "Tennyson", p. 247] "... he has been rewarded with the despite of an age that succeeds his own in shallowness."