This page was last updated on April 23, 2010.
Close corporate tax loopholes; Veronica Kaylor; Beaver County Times; April 23, 2010.
Below is a detailed critique of the subject letter.
“I urge my state representative, Jim Christiana, to vote now to support the closing of corporate tax loopholes.”
[RWC] To begin, I oppose so-called “business taxes” for at least two reasons. First, corporation income taxes are double taxation. That is, the government taxes a corporation’s taxable income and then taxes the dividends shareholders [including pension plans, IRAs, and 401(k)s] receive. Second, business taxes are a scheme to hide true taxation from the ultimate taxpayers, you and me. In some cases, businesses are prohibited by law from itemizing taxes on their invoices. You see, businesses - like government - don’t have any money; it all belongs to the owner(s). One way or another, business taxes are paid by individuals - customers, employees, and owners. According to the Tax Foundation, the average U.S. taxpayer worked eight days in 2002 to pay federal income taxes levied on corporations. In addition, we worked a fraction of a day to pay other business taxes. Business taxes are approximately seven percent of our total personal tax burden. That is, seven out of 100 tax dollars we pay are business taxes.
Note Ms. Kaylor’s use of the term “loophole.” A loophole is a legal provision of the tax code you don’t like, usually because you don’t believe it benefits you personally. For example, if you didn’t like the home mortgage interest deduction because you rent or your house is paid for, you would call it a loophole because the deduction reduces the tax liability of taxpayers who can use it. You would claim the deduction (loophole) allows some taxpayers to escape paying their “fair share” of taxes. That’s what Ms. Kaylor is doing with legal provisions of the PA tax code. To increase collections, Ms. Kaylor wants to eliminate certain legal deductions and/or exemptions. What follows is some information Ms. Kaylor probably doesn’t know or chooses to ignore.
The Pennsylvania Capital Stock and Franchise (CSF) rate of 7.24 mills for 2003 was highest in the nation. Since then, the CSF rate was scheduled to drop by one mill per year until it expires completely in 2011. That said, at 2.9 mills, PA’s CSF tax was still fifth highest in 2009.
The Pennsylvania corporate net income (CNI) is 9.99%, second highest in the nation.
Pennsylvania is one of a minority of states imposing both CNI and CSF taxes. Pennsylvania and Massachusetts are the only two states that rank in the top 10 for both taxes.
According to the Tax Foundation, “If Pennsylvania were its own country, it would have the highest overall corporate tax rate in the world at 41.5% (federal plus state, accounting for the state-local deduction).”
Finally, higher taxes drive away businesses and jobs.
“I believe it’s time to think out of the box before we are in the box - a pine box. I won’t be able to afford a fancy casket, just a simple pine box.”
[RWC] How is wanting to increase someone else’s taxes “think[ing] out of the box?”
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