Roy – The basic point remains that the objective of any tax system is to progressively distribute the burden of paying for government services. The tax on corporate profits is one of many tools that we use to distribute this burden.
When I buy a shirt, I’m taxed. When I get the shirt dry-cleaned, I’m taxed. The low- and moderate- income earners are the one’s being taken to the cleaners by our tax code due to its regressivity. Double-taxation can be argued for any taxpayer, businesses are no exception. Our tax structure exists so that the tax burden is spread among taxpayers. Eliminating the corporate income tax would create massive inequity and further accelerate the trend to overtax working families.
In a perfect world, we would find a way to maintain a progressive tax system and eliminate the evils of “double taxation.” And you?re right that individuals shoulder the ultimate burden of any tax on business. In the case of the corporate income tax, those individuals are shareholders – the very group that has seen its federal tax bill plummet under the 2001 and
2003 rounds of tax cutting.
“Double taxation,” although not desirable, is rampant in the tax code and it’s not always wealthy shareholders who are “hurt” by it. You might say that the solution is to move to some sort of national consumption tax, but to make this debate meaningful, we need to stick to today’s political realities – like the reality that even after you apportion all of state and local taxes to individuals, it is low- and middle-income families in North Carolina that pay the greatest share of their income in taxes.
As the Budget and Tax Center demonstrated in a recent Tax Brief, the Small Business Survival Committee’s state comparison report that you cite is a badly flawed analysis of our small business climate. The study’s measures are arbitrarily chosen (such as the “number of bureaucrats per 1000 residents”) and have no predictive value of small business success whatsoever. Not surprisingly, a recent report by the US Small Business Association
directly contradicts the validity of the so-called Small Business Survival Index. The fact is that while North Carolina has ranked 37th in the nation for the past two years on the Survival Index, the survivability of actual
businesses in North Carolina is quite strong. From 1990-2002, North Carolina ranked 6th in the nation on the total number of employer firms, 11th on the number of employer firm formations, and 38th on the number of firm terminations. In addition, North Carolina performed better in each ranking than every neighbor state.
