I'm Pete du Pont with the National Center for Policy Analysis. When Treasury Secretary Paul O'Neill said he favors abolishing the corporate income tax, he was simply echoing the sentiments tax reformers on the left and right have shared for decades. Abolition would do more to improve the economic competitiveness than almost anything congress could do.
The corporate income tax is a double tax. Profits are first taxed at the corporate level and again at the individual level when they're distributed as dividends. This discourages saving and investment by taxing this form of income more heavily than others, like wages and interest.
Less saving and investment means fewer jobs and lower wages. So the ones who really suffer are working people.
The tax encourages corporations to finance growth by going into debt, rather than issuing new stock, because interest payments are tax deductible, whereas dividends are not.
So, corporations are highly indebted, thus more vulnerable to bankruptcy if the economy factors.
So, how about ditching this one altogether?
Those are my ideas, and at the NCPA we know ideas can change the world. I'm Pete du Pont. Next time, the mood for tax cuts.