Corporate tax policy in the United States is a mess; big businesses are able to skirt their tax obligation while small businesses suffer. While there are literally hundreds of changes we could make to the US Corporate Tax Policy, we decided to feature a few options.
Raising/Lowering the corporate tax percentage
Some critics argue that our corporate tax is too high relative to other countries and has led companies to offshore their businesses. While the actual marginal corporate tax rate is 35%, many corporations are able to reduce this figure through a number of deductions.
Eliminate Corporate Deductions
If many of the current corporate deductions were eliminated, the corporate tax percentage could actually be lowered while increasing federal tax revenue. Critics of corporate deductions argue that the deductions are only accessible to large corporations with expensive accounting firms, which leads to bigger businesses paying lower taxes than small businesses.
Eliminate Corporate Subsidies
The most controversial of corporate subsidies would have to be “farm income stabilization,” a.k.a. farm subsidies. A product of the Great Depression, the United States gives about $20 billion a year in direct subsidies to the agricultural business. While nearly a century ago, these subsidies helped farmers survive through the food surplus, now these subsidies go mostly to large corporations. Critics argue that many corporate subsidies, such as farm and oil subsidies, are out of date and should be removed or replaced by subsidies for “green technologies.”
More Tax Brackets
The top corporate tax bracket applies to corporate with revenue of 18.3 million and up. With many US corporations earning revenues in the multi-billions, some argue that we need to add new and higher rate tax brackets for these ultra successful corporations.
Under our current system of corporate taxation, corporations are taxed on their revenue minus their cost of goods, effectively their net profit. An alternative to this would be to tax all revenue regardless of cost of goods, at a decreased percentage. Many would argue that this is a tax on success of a business, as the goal of a business is to increase revenues in order to grow.
Clearly, a single option is not going to solve all of our problems. Most economists would agree that for the US corporate tax system to be revamped, a comprehensive plan must be put into place, including some of the ideas listed above.