Recently (as you can see in today’s video), talk of
corporate tax reform has started in Washington D.C. While I understand that if the federal
government does anything, it will likely have a negative impact, but that will not
stop me from proposing common sense measures to corporate tax reform. Simply put, corporate tax reform needs to
center around simplification.
Taxes
are costs to a corporation. Costs
influence every decision a company makes.
Those decisions include how much to produce, how many to hire, and what
price to charge. What will an increase
in corporate taxes do for hiring? What
will an increase in corporate taxes do for prices? What will these increases due to the economy?
As we can see from the second chart, the degree in
volatility in tax revenue from corporations has increased dramatically in the
last two business cycles. These charts
make the argument that it is in the best interest of the government
to reform the corporate tax code.
Unstable sources of revenue from the government side can only lead to
unexpected budget deficits.
In addition, I find it extremely interesting that the
government projects a 7-10% decrease in revenue from corporate taxes in
2015. Some light research on this topic
did not produce a reason. If anyone has
any theories, I would be happy to hear them.
Finally, having a simpler tax code will benefit corporations
and the economy. A simpler code will
make it easier for corporations to forecast their tax costs. (Forecast as opposed to budget). By having a better handle on taxes (and
therefore costs), the employment market can become less volatile to dramatic
changes in the economy. By making the
tax code more complicated, the government will increase uncertainty and fear in
corporate America, thus hurting its ability to hire.
I cannot stress enough that I am not calling for tax
increases or decreases on corporate profits.
I am calling for a simplified tax structure that will allow companies to
plan
better. Better planning leads to
more transparency, which can only help the greater economy.
