Sunday, February 07, 2010

“Corporations should say, not pay”

That’s Todd Rapp, a brother in arms to Tom Horner in that nest of well-oiled confidence men and shock troops who come and help when the CEO finds himself, alarmed and dizzy, in front of the cameras, Himle Horner. Rapp had a homily this morning in the StarTribune: Eliminate the corporate income tax, and nobody gets hurt.

Rapp is really responsible for the second part of the post title; the Supreme Court in Citizens United gets the nod for the first part. But it is curious, to me anyway, that on the one hand, by golly, corporations are just like people and have free speech, and on the other, that they shouldn’t bear one of the incidents of citizenship: paying taxes.

The centerpiece of Rapp’s argument in his op-ed piece is that corporations just shift the taxes to other people, like the people who buy their products, and we should therefore eliminate the Minnesota corporate income tax. If they’re going to be profitable, of course corporations shift their taxes. They have to shift the cost of all their inputs in the price they charge for their product or service: all of their raw materials, the cost of labor, and utilities, for example. But Rapp reports it breathlessly like some new revelation from his personal prophet; maybe his personal prophet is Tom Horner!

Tom Horner, the candidate for governor who may have put the field into triple digits, and for whom Rapp is doubtlessly a stalking horse, floated this hare-brained idea before, and Spot said this:

Even Tom Horner might admit in a private moment that businesses are consumers of, and beneficiaries of, government services. On a local level, fire and law enforcement, utilities, streets and roads: almost everything a municipal or county government does. It’s true on a state level, too. Law enforcement, maintenance of a court system, roads, protection of property in the event of natural disasters or civil unrest when the Guard is called out, and the list goes on.

But Spot, doesn’t business just include the taxes paid in the price charged?

Yes, grasshopper, it does. But when a business has to include the social costs of its operation in its price — taxes or pollution abatement or whatever — the price more accurately reflects what a good or service really costs to produce. If a polluter causes or exacerbates asthma, the public pays for part of the polluter’s cost of production. Likewise, if a business benefits from government services provided, but doesn’t pay for them, the public has to.

We can argue about the amount of taxes that should be allocated to business — and we do; it’s called the political process — but Horner’s argument is just for pikers, scrubs, and freeloaders.

The market actually works better if consumers make choices based on the true cost of production of the things they buy.

Rapp also repeats Horner’s argument that business taxes stifle growth.

But what if Rapp had made this argument: we should eliminate the taxes on plumbers because it would reduce the amount that plumbers had to charge people to come out and install the new dryer, unplug the drain, whatever. It would even encourage the recruitment of more plumbers. Or this one: the cost of tickets of to professional sporting events is through the roof! Let’s eliminate the taxes on professional athletes – give Brett Favre and Joe Maurer a complete tax holiday – so that they will work for less in Minnesota, so that Ziggy and the ghost of Carl can afford to take less of the hard-earned money of ticket buyers.

Rapp will sputter, this is entirely different! But not really that different. From Spot’s same post:

Horner says we have to get rid of business taxes because they “stifle growth and innovation.” Anything a business has to pay for stifles growth. Perhaps Tom thinks that a business should just be permitted to steal its raw materials? Using slave labor would also undoubtedly save millions of dollars. And environmental regulation? Think about how much money utilities could save if they could just belch that darn coal ash into the air for all of us to breathe? Or chemical companies were permitted to dump waste into rivers. What’s a river catching fire or two among friends?

The examples are not just silly. They are all examples of a business enterprise shifting the cost of its operation on to the public or to other individuals. An elimination of business taxes would be no different.

There is some clean up left to do on Todd Rapp’s little bit of Tom-foolery, but it will have to wait for tonight or tomorrow.

Update the First:

“Many of the Minnesota Legislature's most-respected tax wonks,” and “most tax experts” are introductory phrases that Rapp uses when making his points for the elimination of the corporate income tax. Who edits this guy? Katherine Kersten? Who are these deep thinkers? Rapp doesn’t say. But somebody at ought to call Himle Horner and ask. Their phone number has to be published, you’d think; after all they are in public relations.

To the best of Spot’s knowledge, the only legislator to have put a bill in the hopper to eliminate the corporate income tax – certainly in recent sessions – is Senator Geoff Michel, who by even the most generous description would not be called a tax “wonk.” He’s a guy who took the “pledge” and opposed the Omnibus Transportation Finance Bill of 2008. Geoff’s not a wonk; he’s an ideologue.

Come to think of it, Rapp’s buddy Tom Horner did support Michel for reelection.

Rapp admits that revenue from the corporate income tax would have to be replaced, and he says we should find a “fairer” and “less regressive” way to do it. Remember, Rapp says that the corporate income tax is “regressive” merely because it is shifted – a slender reed upon which to lean, indeed – but he doesn’t really propose a replacement. But gosh darn it, Rapp says, there must be one!

Here’s an idea, Todd, get back to us when you’ve got a specific plan to plug the budget hole you want to create.

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