Entrepreneurs are among America's greatest resources. These individuals try to change the status quo because they expect to use resources to create higher value than those resources are currently producing. This takes investments, and investments are risky. The return to these investments is the economic growth that they create, which is profit. Yet the government often taxes these profits twice, once at the business level and then again when the profits are distributed to individuals.
This double taxation not only dampens the incentive to invest, but also obscures who actually bears the burden of these taxes. Corporations are often personified and demonized, but a corporation is a legal entity, not an actual person. Because a corporation is made up of a group of individuals but is not actually an individual, corporate taxes are really taxes on the stakeholders in the corporation. In a U.S. Treasury report, William Gentry points out that empirical studies show that employees and consumers really bear the cost of corporate and investment taxes.
Simulation results show that repealing the corporate income tax alone, which would cost approximately $300 billion in annual tax revenue, would produce by 2012:
- 2 million more jobs than the baseline scenario;
- $280 billion more in real GDP);
- $4,000 more in real disposable income for a family of four;
- $707 billion more in household net wealth—the base of economic strength and stability.
Repealing the corporate income tax would accomplish President Barack Obama's stated goals of increasing investment and ushering in an era of responsibility and economic growth, all at a lower cost than the recently passed stimulus bill.
Repealing the corporate income tax is a relatively low-cost way to implement the President's stated goals. At a time when U.S. employees are seeing jobs leave the country, a tax plan that increases the competitiveness of the U.S. business environment and encourages saving and investment by individuals would allow entrepreneurs to implement their ideas for dealing with the challenges of the 21st century. It would also encourage job-creating businesses to locate in the U.S. It is important that this country's leaders signal that the United States is still the land of opportunity.