GOP senator floats eliminating the corporate income tax

Sen. Mike Lee (R-Utah) on Monday suggested that Congress eliminate the corporate income tax while increasing taxes on capital gains and dividends.

This tax reform framework would help to put “America First,” Lee said in an op-ed in The Federalist.

“More than that, it would put the forces of globalization, even global elites themselves, to work for American workers, instead of the other way around,” he said.

The Utah senator said that globalization and automation has often resulted in American investors being able to make more money by investing in places like India and China rather than in places in the U.S. He also said that the current U.S. tax system is “hopelessly outdated.”

{mosads}Under the current tax system, investment income is taxed at lower rates than labor income because it is assumed that investment income will be reinvested in the U.S. But now, lower rates on investment income “may just be giving preferential treatment to rich Americans for creating jobs in other countries,” Lee said. 

The senator said that the current corporate income tax “takes money that would otherwise be some combination of investors’ dividends and workers’ wages.” As a result, eliminating the corporate tax would “in short order boost take-home pay in every industry across the country,” Lee said. Raising tax rates on capital gains and dividends could help offset the revenue loss resulting from eliminating the corporate tax.

“Taken together, these two changes would transfer the workers’ share of the corporate tax onto American investors, who, again, are the natural and disproportionate beneficiaries of globalization relative to American workers,” he said.

Lee’s op-ed comes as congressional Republicans and President Trump prioritize tax reform. Proposals from House Republicans and Trump would lower the corporate tax rate but would not cut it all the way to zero.

In a recent interview with The Wall Street Journal, Trump called a provision of the House Republicans’ tax plan “too complicated.” That provision, known as “border adjustment,” would tax imports and exempt exports and is seen as an alternative to the tariffs Trump has floated.

Lee said he agreed that the border-adjustment proposal is too complicated and said it “could ravage huge swaths of our economy” if exchange rates don’t adjust as some economists predict it will. He also said he has concerns about tariffs.

Under his tax reform framework, “free trade would no longer be a mixed blessing for working Americans. It would work for all Americans, both as consumers and as workers,” Lee said.

“The goal of this tax reform is twofold,” he said. “First, to channel more of the global economy to the United States. And second, once it’s here, to channel more of its fruits to American workers.”

Lee had previously put out a tax reform proposal with Sen. Marco Rubio (R-Fla.) that had differences with the framework he laid out Monday. His spokesman, Conn Carroll, said that the new plan “is more likely to reduce tax burdens on working Americans and increase investment in the U.S. Economy.”