What if corporations paid no taxes?

A former American Express CEO says he has the remedy for America's struggling economy and unfair tax system.

By Aimee Picchi May 22, 2013 2:59PM

Tax form (© Corbis)As Apple's (AAPL) tax strategies take center stage amid a debate about corporate loopholes, one former chief executive says he has the solution to what many people consider an unfair taxation system. 


"The corporate tax rate ought to be zero," Harvey Golub, the former CEO of American Express (AXP), told Bloomberg Television


Golub, currently the chairman of financial advisory firm Miller Buckfire, said the result would not only be fair but would boost economic activity. 


"You'd see a boom you couldn't believe," Golub said. 


But that idea isn't likely to go over well with most Americans.After all, many already find it unfair that they're socked with seemingly ever-rising taxes (on property and income) while Apple and a coterie of other corporations use techniques to shield their assets and profits.


But Golub doesn't believe corporate profits should go untaxed. Instead, he told Bloomberg one way to make the system fair would be to tax dividends and capital gains at ordinary income rates, instead of their current 15% rate. That lower rate has come under fire from critics who say it favors the wealthy and people able to invest in the stock market, rather than the average American worker. 


Former presidential candidate Mitt Romney felt the heat over dividend and capital gains taxes when he disclosed last year that his tax rate was close to 15%, partly because of his investment holdings. For most American workers, wages and salaries are taxed at much higher rates. 


As for Apple, the tech giant tapped a cash-management strategy that stored $102 billion overseas, an amount that's larger than the GDP of many countries. But while that money is out of reach of any government's taxing authorities, Apple hasn't done anything illegal with its strategy, which CEO Tim Cook made a point of in his testimony before Congress on Tuesday.


Golub argues that consumers and legislators are viewing corporations the wrong way because, in his opinion, businesses "don't pay taxes. They collect taxes and they take those taxes out of wages, prices to customers and investor returns." 


Sure, that's one way to look at it. But for many consumers, Apple's strategy may never seem like anything other than a tech giant trying to skirt its obligations through fancy tax maneuvers.


Follow Aimee Picchi on Twitter at @aimeepicchi 


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50Comments
May 22, 2013 4:11PM
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I support a 0% tax rate in theory.  Problem is that theory and reality are 2 different things. In theory we already pay the corporate taxes in prices.  If tax rate was set at 0% then prices should drop and/or reality employees get pay increases.  In reality prices would stay the same and executives would pocket the extra after tax profit and distribute the rest as dividends.
May 22, 2013 3:32PM
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Are you kidding me??  This douche bag wants the American people to be burdened with paying ALL the taxes while the corporations get to keep their money and get richer and richer??  What is this guy smoking?  The greed pipe?
May 22, 2013 4:35PM
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Final consumption sales tax, the only tax, no item or person exempt. Then let the American people directly decide what they will buy threw government (bypass congress). Let the American people cut government costs and balance the budget.

 

With no taxes on business, jobs and money will move to America.

May 22, 2013 4:58PM
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From What's that again?

Corporations depend on local, state and federal support in the form of services and infrastructure.  Police and Fire protection for their plants and facilities. Domestic and Industrial Water, Sewer, Fire line infrastructure to support their operations.  Local, State and Federal highway infrastructure to move their products to the market place.  Airport, Railroad and Seaports to connect their raw  materials thru finish products with the global market and economy.  To state that corporations should not be involved in supporting the construction and maintenance of these services at all levels is ridiculous and upon uttering that statement, Mr. Golub and Cook should be laughed off the stage.

 

Additionally,

 

Mr. Cook should take care and not gloat too much on his tax avoidance maneuvers.  He may be "protected" by the GOP (who are BFF of business no matter what their transgressions) but those "Socialist" EU countries will no doubt start putting pressure on Ireland and all the other tax havens thru out the world.  Note Switzerland's support of having their banks turn over "confidential" client lists.  

 

May 22, 2013 4:45PM
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Golub argues that consumers and legislators are viewing corporations the wrong way because, in his opinion, businesses "don't pay taxes. They collect taxes and they take those taxes out of wages, prices to customers and investor returns." 

=======================================

 

What a load, a lot of corps are sitting on tons of cash today and not paying dividends, giving them 0% tax rates will only increase that cash they keep.  If you think corps will pass on tax saving to shareholders,  employees and customers, you're a mouth breathing moron living in a fantasy world, if anything, they'll just increase the salaries and bonuses they give to their upper management teams Remember, SCOTUS says corporations are people, and we the people pay taxes, so should they.  From the Internet (you can Google "corporate tax rates" and see reality for yourself):

 

--->At 35%, the United States has the highest nominal corporate tax in any of the world's developed economies.  However, the effective corporate tax rate in 2011 fell to 12.1%, its lowest level since before World War I <---  Would post links but this site won't allow it.

 

12.1% is lower than my effective tax rate, so cry me a river! By the way, shouldn't we also get rid of income taxes for partnerships and sole proprietorship's as well, why just corps, we'll just tax nurses, mechanics, truck drivers, cops, firemen and others laboring in the new serfdom. 

May 22, 2013 6:04PM
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Promises promises. Just cut tax rates one more time and all will be wonderful. A rising tide lifts all boats right? The big luxury yachts are already sailing smoothly while the little dingy's are still stuck in the mud.
May 22, 2013 5:23PM
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But according the Supreme Court in the United case, corporations are voting citizens.  Doesn't that make them eligible to enjoy the benefits of taxation.

May 22, 2013 5:09PM
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In my mind, there lies the perfect argument for a flat tax so everyone pays a fairer share of taxes.
May 23, 2013 1:09AM
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my only comment on big corporations like Apple and GE paying no tax is, if they wish to do business in the U.S. then pay taxes, if you refuse through whatever loophole you use, then you can not sell your product in the U.S. Simple as that. You take our money but you won't pay the tax? you say the tax is paid through the price of the item so there should be no tax? if we didn't charge corporations taxes they'll just pocket more money. So I say if you wish to do business here you either pay taxes or get out. On a side comment I do think a flat tax is probably the most fair way to deal with taxes overall. but corporations should not be getting away with this. I hate apple's  business practices as it is, and I know if people didn't stop buying apple products when they heard about suicide nets at the factories overseas then they won't care if they aren't paying taxes either. Iphones are just not that great of a product to sell my soul over, it just isn't.
May 22, 2013 8:08PM
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Then every single American should just incorporate. 

May 22, 2013 4:34PM
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copy the succesful nations on earth, Switzerland, Norway , Netherlands Holland Sweden Denmark, Belguim etc. they tax corps and they HAVE NEVER BEEN BROKE. why do we suffer like fools here, when we see how others manage to live normal lives with less misery than we have here
May 22, 2013 5:08PM
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Roadhouse Blues

High Corporate Tax Rates

Calling for a lower corporate tax rate, the president said:

Obama: [Corporations] with accountants or lawyers to work the system can end up paying no taxes at all. But all the rest are hit with one of the highest corporate tax rates in the world. It makes no sense, and it has to change.

Here the president is exactly right. Of 31 industrialized nations by the Organisation for Economic Co-operation and Development (OECD), the combined federal and state tax rate for U.S. corporations is 39.21 percent. (That’s an effective rate on all income after deductions are taken into account, not to be confused with the top marginal rate on the last dollar earned.) The U.S. rate is second among OECD member countries only to Japan’s, which was 39.54 percent.

Other major trading partners have far lower rates. Mexico’s rate is 30 percent; Canada’s is 29.52 percent; and Korea’s is 24.2 percent, for example. Ireland’s was the lowest, at 12.5 percent. A separate by the World Bank — which tracks more than 200 countries — found the top U.S. marginal tax rate of 40 percent on corporations (a combined state-federal rate) was tied for fourth highest, exceeded only by the United Arab Emirates (55 percent), Uganda (45 percent) and Japan (41 percent). The U.S. tied with Libya, which also has a 40 percent top rate. (The World Bank cited among other sources an , the big accounting firm.)

Some corporations do manage to pay less. A study by the University of North Carolina, , found that U.S.-based multinational companies paid an average effective rate of 26 percent, only slightly more than the global average of 25 percent. But the same story noted that companies without overseas units pay higher rates. 

 

This was from FACTCHECK.ORG.. What site did you say your information was from?

May 23, 2013 12:30PM
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What a load *#@*& Corporationsa are only interested in make a profit and there goal is constantly increasing profits without regard to consumers, laws or the countries they are selling in.  No matter what it is a board of directors making decisions and if they can increase their profits, they will period.  Then they will sell their shares and only be taxed at a capital gain rate of around 15% unlike wage earners (the 90 pecent plus rest of the US population) who pay up to 37 percent or more in taxes on their incomes.  What we need is to have a flat tax rate for everyone including corporations (since they seem to have more rights than the average US citizen) and the rich to be taxed the same by doing with unfair capital gain rates for the rich.

May 23, 2013 4:15AM
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 This is a problem first analyzed by Joan Robinson and Michal Kalecki in the 1930's. Under perfect competition, Golub would be correct, since under perfect competition, price would ultimately be driven down to equal marginal cost. However, Golub is 100% dead wrong under conditions of imperfect competition such as monopoly and oligopoly. And it is a fact that the U.S. economy is hyper- monopolized and oligopolized, with perfect competition having gone the way of the dodo bird. Under conditions of market power, price is always in excess of marginal cost (and is never less than marginal revenue product), and firms face downward- sloping demand curves. Therefore, such firms will pass along only a fraction of increased costs in the form of higher prices and absorb the balance because they do not wish to raise their prices sufficiently to cause potential competitors to enter the market and undercut them. Thus, taxing monopolists and oligopolists and cartelists has the effect of reducing their rates of monopoly profits, aka rents and quasi- rents.
May 23, 2013 1:19PM
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He is right.  The phrase "taxes are punishment for success" is much more true in the context of corporate income taxes.  It amazes me how many dumb people don't understand that taxing corporations and taxing the individuals who run those corporations are two entirely different things.  If the corporate tax rate was zero, that would not mean free money or less taxes for rich executives.  ASSUMING that they just "pocketed" the savings - we are here assuming also that somehow competition didn't force lower prices and that their boards of directors didn't expect them to invest it - their salary would be taxed as individual income.

May 22, 2013 3:51PM
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lmao.Lets see,they already have seen record profits and prefer to hide theyre money rather then to reinvest and they need a Fing tax break at the expense of average Ameircans.Sounds good to me, DB!
May 23, 2013 4:34AM
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ANY person that makes 1 million or more should pay a flat rate of 50%.
May 22, 2013 5:09PM
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What an incredible moron.  Everybody would file for a corporation and NO ONE would pay any taxes.

 

Why doesn't this fool just pray for magical ponies to bring him free cash.

 

The simple minded dolt.

May 23, 2013 7:08AM
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Do away with all tax rates and the IRS. Pay taxes on what you buy.
May 22, 2013 7:58PM
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It's already happening, so this is somewhat moot;

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