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How should the burden of the corporate and business tax be distributed, that is, how should the tax rate be scaled?
The corporate and business tax should be levied against annual gross revenue, not net profit. Since
gross revenue is a much larger figure than net profit, the tax rate would be much lower.
Taxing annual gross revenue would simplify and rationalize the tax on corporations and businesses. As things stand today, the
government and businesses haggle about what are legitimate revenues, operating expenses, and taxable profits. The result is a labyrinth of complex tax code in which businesses, with the help of their servants in government, foist the cost of excessive luxuries such as expensive meals, travel, executive office appointments, and every kind of employee perk onto other taxpayers. The government needs tax revenue to operate. What one corporation or business evades by wasteful self-indulgences written off against profits during tax form preparation, the government must take from other taxpayers. In taxing gross revenue rather than net profit, insofar as taxes are concerned, government scrutiny could be removed from the operating cost and profit areas of businesses, and businesses would begin to make decisions concerning operating expenses and capital
expenditures based entirely on sound business judgment rather than on how much they can get away with shoving unto other taxpayers.
Businesses and government would, however, continue to haggle over
annual gross revenue. Getting less than honest businesses to report all of their revenue would likely be the central problem. While determining net profit in the current tax system is a tricky business, in the new system determining gross revenue
would be a much simpler matter. Just as entrapment is used against those who commit drug and sex crimes, it could easily be used against a business that does not honestly present receipts to customers and record and report its
Government would probably have insufficient
resources to adequately monitor all that it would like to monitor. In this
matter government would have a friend if it cared to use it: the American people.
Anyone could attempt to make an improperly conducted purchase from a business,
that is, a purchase lacking the proper receipts, paperwork, etc. that would normally necessitate
the business’ entering of the transaction into its own records. If
successful, said purchase could be reported to the appropriate government
agency. Focusing a bit of its limited resources on the suspect business, the
government agency could itself attempt to make such purchases from
the company. If successfully entrapped and prosecuted, the person originally
reporting the business to the agency could be rewarded handsomely, a certain
percentage of the fines paid by the company. Some people might even make a
career of it. Companies may attempt to entrap competitors. Disgruntled employees
or ex-employees could blow the whistle on their cheating employers. Disgruntled
customers could get even with a business if the business could be proved to be
conducting illicit transactions. Businesses that keep their sales procedures and
revenue records squeaky clean, i.e., honest businesses, would have nothing to
fear. Evasion of the reporting of revenue could become rare and could come to be
considered socially taboo.
This demos issue would require yet another kind of display on its page and response from the voter. The issue
would be presented as a line graph. A vertical line along the left edge of the graph,
the vertical axis, would be labeled at intervals from bottom to top with percentage tax rates,
i.e., 0%, 1%, 2%, 3%, etc. A horizontal line along the bottom edge of the graph,
the horizontal axis, would be labeled from left to right with
annual gross revenue amounts, i.e., $0, $1,000, $10,000, $100,000, $1,000,000, etc.
The single line currently displayed on the graph, the
percentage tax rate line, would represent the current consensus of the demos
electorate on the issue. A demos member would vote on the issue by selecting
various parts of the tax rate line and coloring them green, yellow, and red to
indicate which portions of the line and, therefore, the tax rate should be
increased (green), kept at their current level (yellow), and decreased (red).
Methods of voting are discussed in more detail in Appendix 1.
Depending on the consensus of the demos, the tax rate line
could tend toward the horizontal, thus tending toward a
“flat tax,” the same tax rate for all corporations and businesses. A
horizontal line at the 3% level would represent a flat 3% tax rate on all
corporations and businesses. A horizontal line at 0% would mean that there would
be no tax on businesses at all. Or the tax rate line could curve upward as the
line extends toward the right edge of the graph. This would produce a
progressive tax rate in which businesses with larger gross revenues would be
subject to a higher tax rate than businesses with lesser revenues. The
calculation of taxes is discussed in Appendix 2.
This ability of the demos to set a flat tax rate at some level
or a progressive tax rate would give it a very important control over
corporations and businesses. Not only should “we the people” have
control over the size of the government under which we live, but we should have
control over the size of corporations and businesses that are allowed to exist.
We need not look to the heavens in fear of hostile aliens. In
the form of the modern corporation, we have created an alien form of ‘life,’
a Frankenstein that, both within and without, consumes humans for profit and
growth. Our world has become a
“corporate world” in which giant multinational corporations push
governments, employees, and consumers around everywhere on the planet, reducing
almost everyone to insignificance and servitude. The largest corporations have
reached the size where they are larger and more powerful than most governments.
Even the American government struggles beneath their power.
Just as, among other reasons, the creation of a strong national government was the
plutocratic founders’ countermove against rising democracy at the state level
of government, multinational corporations today can be seen as a plutocratic
countermove against the democratization of governments around the world. Using
multinational corporations to perform end runs around the world’s governments,
their principal owners, the elite’s elite, now hold a global hegemony of power
and wealth. With resources strategically stashed around the globe, the global
elite now reside in a worldwide stratosphere of power and wealth high above the
turmoil and inconveniences of lesser mortals and particular nations. In the form
of the multinational corporation, the age-old dream of the few of the perfect
management and exploitation of the many has become a reality.
No corporate or business entities can be allowed to become
more powerful than the federal government, which is (or at least should be) the
sacred embodiment of our most fundamental agreements and relationship as a
people. No legal entity should be allowed to exist that places so much power
into the hands of a single individual that the freedom of all other individuals
becomes reduced. Corporations should not be allowed to literally take over the
world and enslave us. Corporations are not structured in a manner similar to a
democracy but in a manner similar to a feudal system complete with its
aristocracy and serfs or in a manner similar to an authoritarian state complete
with its dictatorship. In allowing corporations to become mightier than the
government, even if the government is rendered more democratic the nation as a
whole still moves toward increased authoritarianism.
Corporations should not be allowed to grow to a size and power
beyond which we as a people desire. The creation of a demos within the
American government (and within all governments in the world) with the power to
set the tax rate on the annual gross revenues of corporations and businesses
would remove supreme power from the multinational corporations and return
control of our world once again to “we the people” where it rightfully
and morally belongs.
Also, the demos method of electing the president, senators,
and representatives described in this book would
place a new breed of people into government, people who would be more responsive
to the will of the entire populace rather than to the mighty few. These people
would examine and correct the rules under which corporations were allowed to
exist, rendering them more serviceable to the needs of all of us.
How does demos control over corporate and business
annual gross revenue tax rates give it control over the size of corporations and businesses?
consensus of the demos results in a significantly progressive,
i.e., steep, tax rate on larger gross revenues, then the tax burden would become unbearable were a business to receive
revenue beyond certain amounts. It would become a sound business judgment to break the business into two or more independent businesses with lesser tax rates rather than incur the steep tax rate of the single large business. On the other hand, if the electorate
wanted to allow businesses to grow to any size without any interference, all that it
would have to do is to set a
low or even a zero flat tax rate.
It should be the law of the land and of the
entire world that one business or corporation may not own another business or
corporation. Two or more businesses should be allowed to
merge into one business entity, and one business entity should be allowed to
split into two or more completely independent business entities. In every case each business entity
should be taxed on its annual gross revenue as described in this chapter.
So long as one business is allowed to own another
business or a collection or hierarchy of them, either 1) the ultimate
parent business should be taxed at the rate of the sum of its own annual
gross revenue plus the revenues of all of the businesses it owns, or 2) each
of the businesses within the hierarchy should pay its own taxes on its own
annual gross revenue, but all of the businesses should be taxed at the
rate that the sum of their annual gross revenues would be taxed. However a
corporation or business is legally defined and structured—as a single legal
entity, as a simple collection of entities, or as a hierarchy of entities—it
is still a monolithic power and should be taxed as such.
individual persons, as individuals, should be able to make campaign or other
political contributions, not corporations, businesses, or any other entities or groups.
The argument that this would be a violation of free speech is nonsense. The
First Amendment protects the free speech of individuals; it does not
provide that the legal entities that we create such as corporations shall be our
To make it possible for the electorate to set the
size and distribution of the federal tax burden in the demos, the tax code would
have to be extremely simple. There could be no tax exemptions of any kind for corporations and
businesses. This would be the case for the next two demos issues as well.
There could be no personal income tax exemptions of any kind at any time for
anyone, and there could be no inheritance tax exemptions of any kind.
Exemptions are in effect subsidies. It takes money to run the
government. What it does not get from one person or group, it must take from
another. Exemptions for some cause tax increases for others. The elimination of
exemptions would produce the simplest, least costly tax system and the lowest
possible tax rates for everyone.
There should also be no tax exemptions for so-called
nonprofit organizations and donations to them. Such tax exemptions are only a (rather too
invisible) way of dictating which charitable, religious, and other
institutions, forms of art, civic projects, etc. all of us must support. People
whose views do not qualify for tax exemptions must support their own views and
the views of those that do qualify, views that may directly oppose their own. We
should be deciding what we want to support by donating our own resources and
time directly to those we want to
support. When we are not given the opportunity to dump our ‘support’ unto
the next person via tax exemptions and it takes our own real money, then we will
learn who and what individuals truly support.
Although increasingly abused and muddied in recent years,
among the most sacred principles of our system of governance are freedom of
religion and the separation of church and state. On superficial glance, one
might think that by eliminating tax exemptions for religious organizations and
taxing them just like any other corporate body or organization, the intimate
mixing of church and state is introduced. But exactly the opposite is true. It
is when the state subsidizes tax code qualified, meaning selected, religions and
religious organizations by granting special tax exempt status to them that
church and state become intimately entwined. It is when all organizations,
religious and otherwise, are treated exactly the same for the purposes of
taxation that the state achieves absolute neutrality toward religion and the
complete separation of church and state.
A wealthy person generously donating to the city
orchestra, a pious person donating to the church, and a person handing ten
dollars to a needy person on the street should all be treated in the same
manner. The tax system should have nothing to do with their donations. Donations
should be entirely a personal matter.
The no-exemptions tax system
presented in this book produces the lowest possible tax rates for everyone:
corporations, organizations, and individuals. In the demos the electorate
directly sets the overall amount we tax ourselves in support of government, thus
eliminating excessive taxation in the first place. All business and other
organizations and individuals bear their fair share of the tax burden. And the
resources of government, corporations, other organizations, and individuals are
not consumed maintaining, submitting, and processing complex tax data. These
savings empower individuals to donate more to favored organizations and causes
than they otherwise could.
Americans are overwhelmingly generous in many ways with their
money, time, and effort. Many are not even personally against the federal
government being generous with their tax dollars. But the tax system is an
inappropriate location and manner in which to provide lump subsidies for
anything or to anyone. It adds complexity and paperwork and becomes, as is amply
shown, a maze of tax evasion and scam.
All lump subsidies that government wishes to grant to
businesses, organizations, and individuals should be moved to those areas of
government that handle entitlements and handouts. Further, those areas of
government should be consolidated into one entirely transparent entity, so
transparent that it could be symbolically named The Glass House. All of
its deliberations and actions should be completely visible to anyone in the
nation who cares to investigate any of its dealings.
There is one major kind of generosity and wisdom that the
demos would be capable of bestowing: By the appropriate scaling of each tax
(corporate and business, personal income, and inheritance)—not by adding loopholes,
exemptions, and other complexities—smaller annual revenues, incomes, and
inheritances could be taxed only lightly or not at all.
One final word on generosity and subsidy:
Under our current plutocracy they become crushed and smothered beneath an
avalanche of endless need. If the changes to our government and society proposed in this work were put into practice and
a more just and equitable society achieved, the need for so much help would
not be created in the first place, and our generosity would not become so
overwhelmed. We could easily and willingly meet all true need without the use of
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Beyond Plutocracy - Direct Democracy for America
© Copyright 2001-2017 Roger D Rothenberger