How many of you would like to do the following: Reduce the power of the big banks, eliminate the trade deficit, create more jobs in America, encourage small businesses to grow, encourage entrepreneurs from all over the world to start and grow their businesses here, make the rich pay more and balance the federal budget in 10 years maximum?

If you agree with all or most of the objectives above, then take a deep breath because I have the answer: Eliminate the corporate income tax!

Ok, ok, I hear all the howls and gnashing of teeth. I think a lady just fainted. If you are still able, please continue reading.

A corporation is just a group of individuals who join together for a common purpose. Those individuals are called stockholders. The corporate tax is an indirect tax on those stockholders.

Many of those stockholders are middle-income people who are invested directly through 401(k) or IRA plans, or indirectly through the holdings of a pension plan. If a corporation pays taxes, then every stockholder pays it indirectly, at the same rate, regardless of income or whether it is invested in a tax-deferred account.

Because profits are taxed at the corporate level, a lower tax rate is assessed on dividends from those corporations: 15 percent, regardless of income, but if you own through an IRA, 401(k) or pension, you pay at regular income tax rates when you take that money out.

Large corporations do not pay the full rate, and no matter what you try to do, they never will. I could go through a long list of the ways large corporations can shift income to other countries to avoid U.S. taxes, but there is not enough room on this page. The only ones who pay the 35 percent rate are small and mid-sized companies based in the U.S. that do most of their business in the U.S. Effectively, the corporate income tax is used to cripple and slow the growth of small businesses in order to benefit the large corporations and protect them from competition.

Now here is what I would propose:

1. Eliminate the corporate tax.

2. Tax all income for individuals at regular income tax rates. In other words, the rich pay more because dividends and capital gains would be taxed as regular income.

3. Allow companies to accumulate up to two times the necessary operating capital before requiring them to distribute all remaining cash to the stockholders. This reduces the need for companies to borrow, thus reducing the power of the banks, giving the business a cash cushion for hard times, but then ensuring that all future excess cash is paid out and taxed.

The argument against higher regular income tax rates is that most small businesses operate as “pass-through” entities such as S corporations, LLCs, etc., and they already pay regular income tax rates on their business income, thus an increase in tax rates would harm those businesses. But any business could switch to a C corporation status for $500 or so.

If this change were made, it would eliminate the argument that higher marginal tax rates kill job growth. Because no tax would be due as long as the money stayed in the business, and as the business continued to grow, it would not matter how high regular income tax rates went. In fact, a higher personal income tax, with no corporate income tax, would be a great incentive to start small businesses and grow them into large businesses, the very process that creates the most jobs.

But wouldn’t those sneaky rich rascals just go out and start and grow new businesses to delay paying taxes? You betcha, but isn’t that exactly what the country needs now — new businesses, new jobs and, eventually, large tax revenues as those businesses mature?

Having started a business from scratch and grown it to 85 current employees, I have firsthand experience in how hard it is under the current tax system to keep cash in the business to grow and continue to create new jobs — and in how much power that lack of cash gives to the banks. My business is now maturing, and the need for additional cash is now lessening, but this change would be extremely helpful to new and younger businesses. And to job creation.


Randy Green of Madbury is CEO of Green Technical Services, Inc., in Dover.