Arnold Kling  

All Holes, No Cheese?

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Steven Pearlstein reports on your elected representatives at work this election year.

Congress was unveiling the final details of a corporate tax bill so laden with subsidies, and so infused with government industrial policy, that any Eurocrat would be proud to call it his own.

When President Bush in his acceptance speech followed his call for tax reform with proposals for new special-purpose tax breaks, Reason's Julian Sanchez dryly remarked that the President seems to want a tax system that is all holes with no cheese. I think that this pretty much describes the corporate income tax as it exists today. The loopholes, corporate welfare, and compliance costs probably far outweigh the revenue that the tax takes in.

For Discussion. Do the loopholes create a constituency of corporations for whom repeal of the corporate income tax would be costly?

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The author at Random John in a related article titled The abominable Republican tax break strategy writes:
    As I've stated before in this blog, I prefer the Fair Tax proposal, if for nothing else other than its simplicity and transparency. [Tracked on October 11, 2004 8:42 AM]
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Jason Ligon writes:

I don't understand the focus on corporate taxation in any event. Isn't it just a de facto tax on the consumer? Why would a politician concerned about a middle class squeeze want to tax Wal Mart to a greater extent?

Boonton writes:

The loopholes create a constituency for the tax. If you benefit from a $500,000 loophole then repealing the tax altogether will cost you $500,000 (or at least take away an advantage your competition may not have).

It's interesting that Bush campaigned against Gore on the grounds that Gore wanted to give out tax cuts in the form of loopholes rather than blanket rate cuts.

Bill Fellers writes:

Taxes are evil, but targeted tax cuts are evil-er! Every targeted tax cut makes winners and losers. If you're going to have a tax system it should be the same for everyone, period. Are all politicians evil, or are they just very, very stupid?

Yes, but it doesn't matter (to the constituency) if the repeal would, or would not, be costly -- it is certain that the highly paid lobbyists who were recently successful in gaining any tax break would be against losing it.
There should be an alternate minimum corporate tax of 1% of gross revenue for all corps with more than a billion in revenue. The rate for smaller companies should be less (rev/ 1 bil.).

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