Republicans are likely to make the tax cut passed last year permanent. To hear Daniel Gross tell it, that’s a bad thing.
Not so. First and foremost, taxes are not a government entitlement. Reducing spending is not a crime. It is, however, inadvisable at this time.
As demonstrated during the Reagan years, reducing taxes leads to an increase in discretionary income. The result is that, because it’s “free money”, Americans will spend it in the consumer market. Business grows. The tax base grows. Economics 101.
If suddenly fiscally responsible Democrats want to moan about businesses dodging their share of the tax burden, they should be looking in two directions: offshore tax shelters and the tax code itself.
On one hand, U.S. companies should pay U.S. taxes, simple as that. No running off to a corporate HQ in the tropics.
On the other, the tax code is too complex. This writer has an M.B.A. and multiple college level courses in tax accounting. Each of the last three years, however, preparation mistakes have been made in the government’s favor that required amendments to be filed.
If one wanted to reduce tax fraud and close loopholes, a simpler system would do that. There are several viable options, all better than the current sloppy hodge-podge.
Keep in mind, however, when discussing taxes on businesses that the same profit is taxed twice: once when it is earned by the corporation and again when dividends are distributed to shareholders. The same logic applies to capital gains.