Readers React: How to scuttle the corporate income tax without killing government revenue

To the editor: Instead of merely reducing corporate tax rates, the United States should abolish the corporate income tax entirely and instead tax investors on their share of the corporation’s profits, similar to the way investors in partnerships are taxed. Profits gained in retirement plans can be deferred just as they are now, and these are already taxed at ordinary income rates rather than capital gains rates, so small investors will not be hurt. (“Solving the inversion crisis: How the U.S. can keep companies at home,” Dec. 4)

This will be a more progressive alternative to the corporate income tax, which now taxes the profits of all investors (large and small) at the same rate, and which also taxes the profits of supposedly tax-deferred retirement accounts held primarily by small investors.

Unlike the corporate income tax, higher taxes on investors will not reduce companies’ own financial ability to expand. Also, it will not incentivize U.S. companies to invest outside the country or to keep foreign profits offshore.

The tax rates on investors’ profits can be set so as to increase, reduce or have no net effect on total government revenue after eliminating the corporate tax.

Bob Gerecke, Claremont

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To the editor: Michael Hiltzik suggests that the U.S. should reduce corporate tax rates to discourage “corporate inversion” and other schemes companies use to avoid paying the high U.S. rate.

This reminds me of the competition between states to lure businesses, which has been called a “race to the bottom,” in which declining revenues from such competition force states to cut funding for other services. Hiltzik’s suggestion could lead to an international race to the bottom, and that would be a race with no winners.

How about changing tax law so that all U.S. corporations must pay corporate taxes on money they earn here and the difference between foreign taxes and U.S. taxes on foreign earnings? Corporations benefit from U.S. residency, and there is no reason why they should not pay the same corporate tax rate as a company that only does business here.

Bert Bigelow, Orange

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