One of corporate America's biggest gripes is the relatively high tax rates on business here in America (35%). Not that any company (or hardly any company) actually pays that amount what with all the assorted tax breaks, deductions, loopholes, etc. Just look at GE paying absolutely no taxes and in fact claiming a 3.2 Billion dollar tax benefit back in 2010, even though they earned over 5 Billion stateside and over 14 Billion worldwide. (NY Times)

I think we should just throw out the whole corporate tax structure, kitchen sink and all and start with something new. Corporate taxes in their current form are riddled with years of meddling and poor attempts at trying to direct economic/environmental policies by affecting companies’ bottom lines.

My suggestion is that we replace the current system with a VAT based system. We then tie the amount a company is required to pay to their earnings reports. Companies, especially shareholder based ones, aren’t going to want to meddle with the numbers that inspire investor confidence on Wall Street.

I recommend this VAT system be based on a flat tax % and be calculated off gross sales. Many companies plow their earnings back into their business in order to expand and a tax rate that increases with earnings might dissuade companies from expanding/modernizing/becoming more efficient.  A flat tax based on sales will also make calculating and forecasting taxes owed very easy, thereby reducing overhead on everything from tax professionals and lawyers to lobbyists.

I still believe there is a place for the government to offer monetary incentives to influence corporate decision-making on labor and environmental issues, but I think it should be completely separate from tax policy and the funding of government. Much in the same way that small towns ought not to base their budget on traffic tickets and fines, neither should our federal government budget be subject to how well (or poorly) a company is at meeting certain labor/environmental wickets.

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