Taxes And Corporate Deserters first appeared on Floating Path

Taxes And Corporate Deserters

The recent surge in corporate tax inversions has provoked many to criticize companies reincorporating abroad as unpatriotic. These ‘corporate deserters’ are, however, only doing what is in the best interest of their shareholders.

The nation’s tax problem has been identified, but suggested solutions have been sparse. Greg Mankiw submits some alternative tax structures.

So here’s a proposal: Let’s repeal the corporate income tax entirely, and scale back the personal income tax as well. We can replace them with a broad-based tax on consumption. The consumption tax could take the form of a value-added tax, which in other countries has proved to be a remarkably efficient way to raise government revenue.

Some may worry that a flat consumption tax is too easy on the rich or too hard on the poor. But there are ways to address these concerns. One possibility is to maintain a personal income tax for those with especially high incomes. Another is to use some revenue from the consumption tax to fund universal fixed rebates — sometimes called demogrants. Of course, the larger the rebate, the higher the tax rate would need to be.