Opinions of Peter Belmont
Speaking Truth to Power
| The USA needs a corporate minimum income tax |
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by Peter A. Belmont / 2012-01-09
America has a “minimum income tax” for individuals but not for corporations. This allows many corporations to get awauy without paying any tax at all and, presumably, allows many other corporations to escape their full and fair tax burden (Thirty companies paid no U.S. income tax 2008-2010: report): Pepco Holdings Inc, a Washington, D.C.-area power company, had the lowest effective tax rate, at negative 57.6 percent, among the 280 Fortune 500 companies studied. Their report also listed General Electric Co, Paccar Inc, PG&E Corp, Computer Sciences Corp, Boeing Co and NiSource Inc as among the 30 that paid no taxes. I have a modest suggestion. Establish a minimum income tax for corporations that do business in America or are incorporated here. Each year, calculate each corporation’s “real-profit” as its after-tax profit increased by any USA normal income tax liability, and then compute its alternative minimum income tax as (say) 20% of the “real-profit”. Then the corporation must pay the greater of its normal income tax liability and its alternative minimum income tax. Suppose XYZ Corp has after-tax profit of $100M and USA income tax liability of $10M. Then its “real-profit” is computed as $110M and its alternative minimum income tax is 20% of $110M, or $22M. XYZ Corp. would, accordingly, pay $22M rather than $10M in USA income tax. Foreign corporations doing business in the USA would be taxed only on the total profits—correctly assessed—for doing business in the USA. The USA’s tax code is a remarkably complex and obscure document—chiefly because it is filled with special loopholes, including very low tax rates for capital gains, to allow rich corporations (and rich individuals) to avoid taxation on some or all of their income (as reasonably computed). The individual alternative minimum income tax is an attempt to “undo” some of the many, many tax loopholes that tend to allow rich individuals to reduce or avoid their fair tax burden. We need the same mechanism to undo the outrageous tax loopholes that allow the great corporations to avoid paying their fair share of income tax. |
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