The Flat Tax is the way to go.
August 9, 2012 by Dan Mitchell
I appeared on CNBC a couple of days ago to discuss a new report which claims that some big U.S. companies “only” paid 9 percent of their income to the government.
While I’m a bit skeptical of the numbers (did it include the taxes paid to foreign governments, for instance, which can be substantial for multinational firms?), I confess I didn’t read the report.
So I focused on the best way of getting rid of corrupt loopholes while simultaneously boosting the competitiveness of America companies.
In other words, I said we should rip up the wretched internal revenue code and implement a simple and fair flat tax.
As is my habit, allow me to emphasize a few points from the interview.
- It’s good to keep money in the productive sector of the economy because we shouldn’t feed the spending addiction in DC.
- If tax rates are low, there’s much less incentive for companies to lobby for loopholes.
- The only feasible and desirable tax reform is to simultaneously eliminate tax breaks while lowering tax rates.
- The marginal tax rate is what determines incentives for new investment and job creation, which is why America’s highest-in-the-world 35 percent corporate tax rate is a major problem even if average tax rates are much lower.
Sadly, I’m not holding my breath expecting improvements.
Even though tax reform should appeal to well-meaning liberals, Obama seems committed to the class-warfare approach . Romney, meanwhile, mostly wants to tinker with the current system (when he’s not saying worrisome things about a value-added tax).