… what is needed is elimination of the corporate deductible expenses shell game. In 2010, gross business receipts totaled $10.3 trillion dollars (that’s over 70% of GDP that year), but corporate taxes amounted to just 1.3% of GDP. That amounts to an average tax rate of about 1.8% of gross revenue (even though the nominal corporate tax rate is 35%). The problem is that 35% rate is only paid on income, which is defined as gross receipts minus cost of goods sold, payroll, depreciation, legal fees, etc. Personal income tax, however, is paid on total revenue (salary, dividends, capital gains etc.) with a few exemptions for things like home interest paid, a small personal deduction, medical bills etc. The point is that businesses are able to deduct far more than citizens are allowed. Buy a pick-up truck? If you’re a business, depreciate $11,500 in the first year, if you’re a citizen, $0. Buy a computer? Businesses deduct up to $500,000, citizens: nada. Hire some help, businesses: 100%, citizens: zippo.
Elimination of this insidious corporate welfare scam would raise $3.6 trillion of additional tax revenue, immediately turning the $1.3T deficit into a $2.3T surplus. And that is with no change in the corporate tax rate. Raising the top rate to a far more equitable 70% would double tax revenue to $7T, but just leaving it where it is would do wonders.