There is a simple solution that would halt the seemingly unending wave of tax inversion deals, says Forbes contributor Brett Arends. Get rid of the corporate income tax.

75px-US-InternalRevenueService-Seal.svgNot only would this remedy stanch the exodus of American companies, the latest aspirant being Burger King, from fleeing U.S. shores in favor of foreign tax-friendly havens; but it would also terminate the practice of a firm amassing trillions of dollars in cash in offshore accounts.  (The problem with these accounts, notes Arends, is that very often they “sit idle” and “do no good” when they should be reinvested at home. That won’t happen as long as the United States taxes repatriated cash).

Further, eliminating corporate income taxes would save firms the money they deploy to hire armies of lawyers and accountants to find loopholes that can help them pay lower taxes.

It’s not as if there’s no precedent for erasing corporate taxes, says Arends. S Corporations, a tax structure popular with small businesses, levies only one tax on the owner, as opposed to dual taxation, the corporate tax norm.

Eradicating corporate income taxes would be a win-win proposition for everyone, the commentator opines.

To bring this to fruition, Arends proposes that the government tax “all dividends and capital gains under the same rates we levy on wages, as ordinary income.” That way, not only will a company save a fortune on corporate income taxes, but the government can make up that difference by taxing investors. And investors who have less money than say, Warren Buffett, will pay less in taxes  — which is, he says, “as it should be.”

But Arends feels his solution “makes too much sense,” and therefore won’t happen.

Source: Burger King-Tim Horton: Scrap the Corporation Tax Completely

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