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End the corporate income tax. That’s right. I, me, the liberal/progressive/socialist/Marxist/leftist all you conservatives hate, I’m saying end the corporate income tax, and here’s how I say we do it.
Republicans and Democrats are currently working on a debt plan that apparently will include some sort of “tax” reform that closes loopholes and lowers the overall corporate income tax rate. The Republicans say it’s good for business. Yes, I know, big shock huh. Democrats say it will raise new revenue to help with the debt/deficit. None of this is going to fix one of the bigger deficit problems though, which is the sluggish economy.
As I write this, the television blowhards are discussing this month’s abysmal jobs report. Private sector employment isn’t growing and state and local government jobs are being lost due to a budget squeeze. The economy isn’t growing because of a demand crisis. That is to say people aren’t buying nearly enough to keep things chugging along. This lack of demand causes employers not to hire or to hire only part-time or temporary help. Those jobs don’t offer enough pay or security for the people who hold them to run out and buy things they need, like houses and cars. This also lowers government revenue as taxes aren’t being paid in. It’s a big ol crappy loop that we can’t seem to get out of.
Democrats, or progressive Democrats at least, would like to see more money going into the pockets of those who will spend it and restore economic growth. It’s a good idea because that’s exactly what the economy needs. They want to accomplish part of this through infrastructure spending, another good idea no matter what the economy looks like. The same idea is behind extended unemployment benefits, food stamps, and other “welfare programs”. Not only do they help people in need but each of those programs return well over a dollar of GDP growth for every dollar the government invests in them. This is where the proposal for eliminating the corporate income tax comes in.
If we want to get more money into the hands of the middle class and working poor, let’s give the private sector an incentive to do so. Let’s set up an alternate corporate tax structure. Under this alternate structure, corporations would have their income tax completely eliminated if they agree to the terms of the incentive. The terms say this: total executive compensation can be no more than 35 times that of the median salary of the company, and all employees must be included in the calculation. Executives averaged about a 28% raise last year. Their pay has grown by astronomical margins over the past dozen years. That growth comes from somewhere, and that somewhere is the salaries of the employees which have been stagnant for well over a decade.
CEOs in the 1950s made about 50 times that of their employees. Now, CEOs can make 300 to 500 times that of their employees. What the executive cap income tax reduction does is provide incentive for American executives to create broad based economic growth through the salary growth of the corporation’s employees. Executives can still make as much money as they want; they just have to take everyone in the company along for the ride.
Not enough you say? Okay, let’s add this in. In years where the executives grow their workforce by a given percentage, their salary cap increases to 45 times that of the median company salary. But, in years where their workforce is reduced by a given percentage, the cap shrinks to 30 times that of the median company salary. This way, an executive can’t follow the Mitt Romney model of business and enter a company, fire half the employees, claim success, and demand a 5 million dollar bonus. No, bad business isn’t rewarded in this new model, only good business is, and truly good business helps the company and the country that provides it the freedom to operate.
If executives will take their employees along on the trip to High Pay and Bonus Land, we’d see several benefits from it. More money for the employees means more spending in the economy. Despite what some conservatives say, many people really do need that new car or truck, especially when they live in places like Perry County where mass transit isn’t available and employees have to commute to their jobs.
Increased demand will lead to economic growth, which will lead to higher government revenues. The budget deficit shrinks and Rand Paul can worry about more pressing matters, like those environmentalists who broke his toilet (Yes, he said this. No, it wasn’t a joke).
I’m sure some conservative will scream “tyranny, freedom, and socialism!!!!!!” over this plan. I’m not saying corporations have to enter this plan. They can stay on the traditional track and pay the 35% corporate income tax. Well, let’s be honest. They’re only paying about 20% because of loopholes like the corporate jet tax break.
Conservatives want to rely on the private sector to fix the economy, fine by me. Let’s give them reason to start helping. Obviously what they’re doing now isn’t working.