Zach Komes

3 years ago
Thank you for your innovative contribution to the corporate tax reform debate. I am intrigued by the plan's ability to reduce corporate inversions and increase foreign investment in domestic companies. From a industrial organization perspective, it would also be very interesting to see if this policy would have any impact on mergers and acquisitions (and thus the growing oligopolistic nature of U.S. markets). Shareholders, now bearing corporate tax, perhaps may seek to play a larger role in corporate governance, potentially seeking only to be taxed on company activities they have ties or interest in, perhaps reducing the consolidation of firms, which I think would help both consumers and the long-term prospects of the American economy.

However, I think there need to be some major changes made to the proposal before enacted including:

- Foreigner taxation: As many have mentioned below, the plan's current lacking a tax on foreign investors could create a large tax loophole (encouraging domestic shareholders to create foreign shell companies to avoid taxes). This also is not very just, as these foreign investors would be free-riding on the services provided to the corporation by the government. This could be changed by placing some form of tax on foreign investors to make the plan revenue neutral.

- Effect on revenues for state and local governments: As many have mentioned below, the federal government see a gap in revenue. In addition, according to Governing magazine, state governments collected $50 billion in corporate taxes in 2012. Phase-out of federal corporate taxes would likely lead state governments to do the same, leading a large revenue gap which may lead to cuts in state spending (ex. public education, assistance for local governments) and increases in property taxes. My home state of Wisconsin, especially, has been hit hard with spending cuts and I worry about the future of our state's competitiveness with continued cuts.

- Effect on deductions: While I think subsidies should be theoretically used as minimally as possible, many corporate tax deductions and credits help create equitable outcomes, especially social mobility. Claire below mentioned many of these (employee benefits, charitable contributions). Corporate tax breaks that are especially important to me are the New Markets Tax Credit and the Low Income Housing Tax Credit, which have both funnelled billions of dollars in private sector investment into historically-underinvested neighborhoods across the United States. As someone who cares deeply about racial equity, I worry how this policy would impact the ability of these communities to access housing and small business capital that has been more freely possible because of these credits. Some might argue that corporations might absorb some of the behavioral changes that were previously incentivized by deductions and credits (ex. R&D); however, this is by no means guaranteed.
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3 years ago
Thank you for your innovative contribution to the corporate tax reform debate. I am intrigued by the plan's ability to reduce corporate inversions and increase foreign investment in domestic companies. From a industrial organization perspective, it would also be very interesting to see if this policy would have any impact on mergers and acquisitions (and thus the growing oligopolistic nature of U.S. markets). Shareholders, now bearing corporate tax, perhaps may seek to play a larger role in corporate governance, potentially seeking only to be taxed on company activities they have ties or interest in, perhaps reducing the consolidation of firms, which I think would help both consumers and the long-term prospects of the American economy.

However, I think there need to be some major changes made to the proposal before enacted including:

- Foreigner taxation: As many have mentioned below, the plan's current lacking a tax on foreign investors could create a large tax loophole (encouraging domestic shareholders to create foreign shell companies to avoid taxes). This also is not very just, as these foreign investors would be free-riding on the services provided to the corporation by the government. This could be changed by placing some form of tax on foreign investors to make the plan revenue neutral.

- Effect on revenues for state and local governments: As many have mentioned below, the federal government see a gap in revenue. In addition, according to Governing magazine, state governments collected $50 billion in corporate taxes in 2012. Phase-out of federal corporate taxes would likely lead state governments to do the same, leading a large revenue gap which may lead to cuts in state spending (ex. public education, assistance for local governments) and increases in property taxes. My home state of Wisconsin, especially, has been hit hard with spending cuts and I worry about the future of our state's competitiveness with continued cuts.

- Effect on deductions: While I think subsidies should be theoretically used as minimally as possible, many corporate tax deductions and credits help create equitable outcomes, especially social mobility. Claire below mentioned many of these (employee benefits, charitable contributions). Corporate tax breaks that are especially important to me are the New Markets Tax Credit and the Low Income Housing Tax Credit, which have both funnelled billions of dollars in private sector investment into historically-underinvested neighborhoods across the United States. As someone who cares deeply about racial equity, I worry how this policy would impact the ability of these communities to access housing and small business capital that has been more freely possible because of these credits. Some might argue that corporations might absorb some of the behavioral changes that were previously incentivized by deductions and credits (ex. R&D); however, this is by no means guaranteed.
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