- 1. Tax-overhaul backers say corporate rate cut will encourage investment by businesses
2. During #wsjceocouncil interview with Gary Cohn, WSJ asks CEOs to raise hands if they'll boost investment if rates cut
3. Few CEOS raise hands
4. Cohn asks: "Why aren't the other hands up?"
Apparently Mr. Cohn is unfamiliar with the current tax code, which already protects investment from taxation. Consider, e.g., Amazon vs. Walmart: This actually makes the case that we shouldn't give so much tax protection to reinvestment. I think most people would agree that encouraging businesses to reinvest is generally good, but Amazon definitely shows that there's a limit to that line of reasoning. A middle way has to exist, but cutting taxes on profits while doing nothing else sure isn't it. The more I read, the more I'm convinced that the US needs to move away from relying almost solely on the income tax and institute a VAT while cutting income taxes (and possible some very limited form of wealth tax) to create a more balanced approach to generating revenue. One of the upsides of the current tax bill is that it's so bad and will be such a catastrophe that it might spur us to reconsider how we raise revenue. Probably not.The most disturbing stat in business? Since 2008 Walmart has paid $64B in corporate income tax, while Amazon has paid $1.4B. This is despite the fact that, in the last 24 months, Amazon has added the value of Walmart to its market cap. The most uncomfortable question in business, in my view, is how do we pay our soldiers, firefighters, and teachers if a firm can ascend to $460B in value (#5 in the world) without paying any meaningful corporate taxes.
The VAT tax gets dicey, because (a) I don't trust Congress to implement it properly, and (b) it is very easy for it to become regressive. I think the problem is more in how the tax liability is calculated: there are simply too many ways for corporations to make it look like the income is happening someplace else.