Corporate Tax Should be Abolished

Thank you AdamCass, I will quote my opponents arguments and try to refute each one individually. 1."With this interpretation, it is only fair that this 'legal citizen of the United States' pay tax. Corporations, as much as they would like to, cannot only have the better side of the deal." My opponent argues that corporations are "guaranteed the same rights as a natural citizen" and thus should pay taxes as a citizen would. I think that this argument falls apart under close examination. It makes sense that a corporation would have the right to "use" the roads, because what this means is that the owners of a corporation have the right to employ somebody to use the roads. Since all the owners of the corporation and the employees all have the right to use the roads, it makes sense that they still have this right when they call their arrangement a "corporation". Because all of the members of a corporation individually pay tax for these services, it does not make sense to require them to pay a second layer of tax through their corporation. But even if you disagree with this point, there is still good reason to reject my opponent"s argument. First, one foolish policy does not justify another, so if corporate personhood is a foolish policy, and it is the justification for corporate tax, the solution is not to keep both, but to get rid of both. Second, if you believe that a corporation is a "'legal citizen of the United States"" then "it is only fair that this 'legal citizen"" pay the same tax as any other legal citizen, that is, the income tax. If you believe that a corporation should pay tax just like any other citizen, then the argument should be to apply income tax to corporations, not to have a separate tax system just for corporations. 2."Corporate taxation contributed to 10% of US Federal government revenue in 2013, over $234 billion. This is a substantial amount of money, money that goes into education, health, infrastructure, the military and many other key areas of government spending, all of which rely entirely on such finances." Certainly, an enormous amount of money is generated by the corporate tax, but as we have already demonstrated, corporate tax is simply not the most economically efficient way to raise revenue. That is, the harm to the economy cause by generating an additional $234 billion of income tax revenue would be less than the harm inflicted by the $234 billion generated by the corporate tax. (As I explained in Round 2, this is largely due to the mountains of additional and unnecessary paperwork that having two separate tax codes creates) Even better than increasing the income tax would be creating a new tax on a currently unused revenue source such as natural resources. To summarize, all of the public services currently funded by the corporate tax could receive the EXACT SAME AMOUNT OF FUNDING, AT LESS HARM TO THE ECONOMY, if the corporate tax were abolished and replaced with a better method of raising revenue. 3."Furthermore, the competitive nature of retail and industry in this country, between corporations, practically force prices down to as low as possible. The removal of a corporation tax would be unable to in any means lower or reduce overall prices dramatically enough to impact someone's back pocket." This is simply not true. Corporate tax is between 15% and 35% in the United States. [1] Given the enormous level of consumer spending, even a tiny reduction in the prices of consumer goods would dramatically affect people"s back pockets. Competition does drive down prices, but the lowest possible price is made higher by the corporate tax. If a profit margin is too low, investors are not interested in starting new companies or investing in existing ones. Also, if corporate tax were abolished suddenly, it is very likely that many CEOs would keep dividends at present levels, (levels shareholders are already happy with) and use the extra income to reinvest, pay workers more or lower prices. (Companies would have an incentive to do this to attract customers) For years under the direction of Steve Jobs, Apple paid no dividends to owners of Apple stock. However, even in what I think my opponent would consider the worst case scenario, the absurdly unlikely situation that prices would not be lowered and wages would not be raised, Americans would see 15 to 35% increases in their retirement portfolios. Those worried that increased corporate profits would dramatically enrich the already wealthy could propose a similarly dramatic increase in the top marginal tax rate. 4."Furthermore, the United States is in a chaotic fiscal climate. While debt and deficit continues to restrict the ability of the United States Government to deliver various services in a climate of fiscal austerity, the removal of a major revenue raiser would only further impact the budget. If the government, like you suggested, were to instead raise income taxes and abolish/lower corporate tax, this would have a direct impact on the American middle class, through additional taxation." First, it is entirely possible to raise the tax rate on the rich but not on the middle class. But more importantly, my opponent ignores the fact that corporations receive nearly all of their income from the poor and middle class in the first place. The idea that abolishing the corporate tax will lead to class problems is ridiculous. When middle class people own stock in a corporation, and middle class people spend money buying things from that corporation, after paying workers (mostly middle class) the money is returned to the middle class stock holders. Thus, no money has left the middle class. When rich people own stock in a corporation, money is transferred from the middle class to the rich, but this can easily be offset by taxing the rich. A higher income tax rate on the rich directly burdens only the rich. The corporate tax burdens the rich, but also burdens middle class shareholders and consumers, and also creates unnecessary paperwork. 5."Also, I agree that not all corporations are large, wealthy multinationals. The law and the US tax code recognizes this. In the United States, there are many different types of business ownership/entities, which are recognized under federal and state law. For example, a small business in Wyoming classified as a sole proprietorship would be taxed differently to a multinational corporation based on Wall Street. The corporate tax system is flexible in that respect, and larger more affluent corporations are taxed higher than smaller businesses." First, a sole proprietorship is not a corporation. The corporate tax applies only to corporations, not sole proprietorships or partnerships. This illustrates another of the corporate tax"s shortcomings. The (single) owner of a sole proprietorship that makes $100,000 per year will pay a different tax rate than a person who owns 50% of a corporation that makes $200,000 per year, despite the fact that their shares of their businesses" incomes are exactly the same. In fact, in nearly all jurisdictions, the owner of a $100,000 per year sole proprietorship will pay a LOWER tax rate than someone who owns 1% of a $200,000 per year corporation, because the corporate tax is higher than the tax on sole proprietorships. This is obviously a grossly unfair arrangement, and it is the inevitable result of having a separate tax on corporations. 1 http://en.wikipedia.org...