NCPA's Scholar Says It's a Double Tax; Reform Long Overdue
WASHINGTON, D.C. (May 22, 2001) – The Bush Administration may soon push forward on fundamental restructuring of the U.S. tax system, which would include abolition of the corporate income tax, according to remarks made by Bruce Bartlett, senior fellow at the National Center for Policy Analysis (NCPA). Treasury Secretary Paul O'Neill hinted at such a strategy in a weekend interview in the Financial Times. Bush, both as candidate and president, has mentioned restructuring the federal tax system as one of his long-term goals.
"The corporate income tax is a double tax. It's that simple," Bartlett said. "Abolition of this tax is the one economic strategy that Ronald Reagan, Jimmy Carter, former Treasury Secretary Bill Simon and Americans for Democratic Action can agree on."
Bartlett says double taxation of corporate profits has a number of unfavorable economic consequences. Corporate income taxes:
- Discourage savings and investment.
- Encourage corporations to finance growth through debt rather than equity.
- Discourage payment of dividends, since it makes more sense for corporations to retain earnings or buy back shares.
- Act as a veil between a corporation's owners and managers, sometimes leading to mismanagement or even bad management.
"Retaining corporate income taxes can push effective federal income tax rates as high as 60 percent and its deleterious effects are widespread," Bartlett added. "Just think, almost everyone who owns a share of common stock is taxed twice."
Bruce Bartlett's columns are distributed nationally by Creators Syndicate.