Re: Obama XXIII: The Muslin Anti-Christ Wages War on the forces of Christianity!
You get your pick. Either drop the capital gains tax but tax corporate income the same as you would individual income (meaning on adjusted gross rather than net), or drop the corporate tax rate and tax capital gains as normal income for individuals. Frankly, I prefer the latter solution.
There's a third option that probably makes the most sense from a purely economic perspective, which is to unify the corporate and individual income tax code. A substantial number of business owners report business income on their personal income tax return (partnership income, S-corporation income, Schedule C income for sole proprietorship and certain kinds of independent contractors). To the extent that a rational tax policy (unless that is an oxymoron!!) is desirable, the tax treatment of business income ideally would not be a factor in deciding which form of ownership to adopt.
More broadly speaking, a purely income-based tax regime in today's world makes much less sense than a truly simplified, unified tax regime for individuals that would operate as follows:
1) report all cash that flows into the household, from any source whatsoever (asset sales, inheritance, earned income, investment income, royalty income)
2) you get a deduction for asset purchases, insurance premiums, deposits into savings accounts, employee wages and benefits (including housekeepers, repairmen, plumbers, electricians, and babysitters, since you only tax money once and they would then pay tax on it, not you)
3) you pay tax on a graduated scale on whatever is left
you've now eliminated the distinction between capital gains tax, income tax, dividend tax, and estate tax, they are all now part of one single, simple, unified tax structure instead. Imagine how much easier compliance would be! Imagine how much simpler it would be!
More importantly, you've shifted emphasis from frivolity to frugality; from over-consumption to savings and investment and a platform for future growth. The ancillary "green" benefits also would be substantial.
We very nearly had this tax structure implemented in 1943; Secretary of the Treasury Henry Morgenthau was a strong proponent and pushed hard for it. It lost by just a few votes in Congress, from representatives of cotton growers who voted against it because it was portrayed to them as a "consumption" tax...apparently they did not realize that instead they were STILL voting in favor of a consumption tax, except they were voting for a tax on consumption AND savings both!
