Would Eliminating Income Taxes Provide Benefits or Not?

Would Eliminating Income Taxes Provide Benefits or Not?

Scrapping income taxes completely would generate several benefits, starting with the hassle that many corporations and individuals face during tax season, expert Peter Morici contended in a recent CNBC commentary piece.

Policy analysts have repeatedly advocated changing tax policy for both of these two groups, but corporate income taxes in particular have generated significant visibility in recent months.

Negative consequences

Morici, an economist and professor at the University of Maryland’s Robert H. Smith School of Business, asserted that the current policy affecting these corporate levies results in several negative consequences, including a complex system full of exemptions and deductions.

This intricate framework has resulted in lawmakers providing equally complex proposals, for example one the author cited as having an executive summary 194 pages long. This plan, which would require specific education and expertise to understand, was tabled by House Ways and Means Committee Chairman David Camp.

Reform efforts

A wide range of lawmakers, academics and policy analysts have proposed reforms that would simplify and or reduce corporate income tax rates, but these plans have failed to receive approval.

Earlier this year, President Barack Obama proposed cutting the corporate income tax rate and making it easier for global companies to repatriate their foreign earnings. Currently, these or businesses have an incentive to keep these profits, which are generated overseas, where they were earned in the first place.

By making it more difficult for these organizations to bring this money back home, many analysts assert that current policy is holding up investment and job creation in the U.S. Morici specifically mentioned this problem in his commentary piece, emphasizing that unless they move their production facilities overseas, many companies based in the U.S. will end up paying higher taxes than their foreign competitors.

Expert’s proposed solution

This current policy negatively impacts the nation’s jobs market, and while Morici emphasized that many have proposed tax reform with good intentions, the simplest way to address these challenges would be to eliminate income taxes for both corporations and individuals.

To replace the $1.7 trillion these levies brought the U.S. federal government in 2014, he suggested imposing a 12 percent sales tax affecting all private purchases and other payments. Under such a plan, corporations would subtract any taxes paid for items they bought from taxes they collected and then provide this amount to the U.S. Department of Treasury.

Corporations would be able to lower expenses because they would no longer need to value their inventories, and they would also have the ability to avoid double taxation, Morici noted.