Tax Breaks and the Times

http://www.futureofcapitalism.com/2011/03/tax-breaks-and-the-times

The New York Times has been on quite a tear lately exposing special tax deals for influential businesses. There was the story on how GE has had no net federal tax liability, then another on how BlackRock is trying to save millions by being taxed by New York as a general business rather than a bank, then another on how Twitter is going to get a special payroll tax break to stay in San Francisco.

The Times' underlying assumption on all these stories seem to be that businesses should pay the highest taxes possible. But there's another way to look at it, which is that the objectionable thing here isn't that some businesses are getting tax cuts but that the tax cuts are just going to companies that are influential rather than to everyone. How about rectifying this with laws that could be enacted at the federal level and in states and local governments: the rate that shall apply in any tax levied by this jurisdiction shall be no higher than the lowest net effective rate paid by any taxpayer. That way all taxpayers would reap the benefits of the special tax deals wrung by GE, Twitter, and BlackRock. Sales tax? If Amazon or newspapers don't have to collect it, no one does. Property tax? If politically connected developers or non-profits don't have to pay it, no one does. Corporate income tax? If GE doesn't have to pay it, no one does. San Francisco payroll tax on stock options for employees? If Twitter doesn't have to pay it, no one does.

If the resulting revenue loss makes it impossible to pay for government services that are necessary, maybe it'll force politicians into the system that makes the most sense anyway — simple low rates (or even a single flat rate) that treats everyone the same rather than favoring certain companies or groups or behaviors. There's a bit of a socialist spin to my proposal — GE's 975-person in-house tax department is suddenly, in a certain way, working for all American corporations rather than just for GE. But it'd force companies to compete on the basis of their ability to provide value to customers rather on their skill at government relations.

by Ira Stoll  |  Mar 27, 2011 at 8:41 am Related Topics:  General Electric, New York, Taxes receive the latest by email: subscribe to the free futureofcapitalism.com mailing list