Monday, August 18, 2008

NYT's corporate tax editorial

Today's New York Times has an editorial entitled "The Corporate Free Ride" that states that corporations are underpaying their taxes, generally speaking, with small corporates leading the way in this practice. This solution-free editorial comment notes that U.S. corporate tax rates are among the highest in the world, and calls the situation "a uniquely American paradox".

Here's an answer. Simplify the tax code for individuals, small businesses, small and large corporations. There has been and is now no leadership in the executive or legislative branches to do this(one of the few truly bipartisan efforts over the last 16 years). Complex rules lead to complex strategies to minimize taxes paid, as any corporations shareholders want that company to do in a legal way. The NYT does in one sentence heavily imply that many corporations are breaking the law on transfer pricing between countries, but it is a totally unsupported statement typical of the Times general opinion of U.S. business. No doubt a few corporations have hit the chalk line on this, but the great majority hire tax attorneys at sizeable salaries to manage taxes as efficiently as possible, avoiding legal issues.

Could a new President possibly understand the need for simplification, and the next Congress possibly give up the bounty from all of the tax loopholes that they slip into legislation for their constituents. Unlikely, but it would be worth a try. Some economists say that simplification with less loopholes would lead to more compliance, higher receipts, and the opportunity to encourage R&D and capital formation(and jobs) through lower corporate tax rates.


Anonymous kf said...

You certainly have company on this one. In the New York Times yesterday they printed six letters to the editor on this issue and five had strong variations of your same opinion. The one that endorsed the editorial was the least coherent of all.

If the NYT printed that ratio and so many, the negative response to their editorial must have been overwhelming.

6:10 PM  

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