April 15

So last week my favorite instructor from the University of Yellow Kiosk sent me a link to a story about AIG in the NYT — OMG! Turns out our favorite corporate scofflaw, not content with the $200 billionish it’s received from the U.S. of A., is actually suing the feds in an effort to lower its tax bill by $300 million. The article is crisp and direct and points out the many ironies here, notably that “A.I.G. is effectively suing its majority owner, the government,” and that the company is using taxpayer funds to pursue the case. Think about that when you’re filling out your 1040, right?

The moral outrage is so thick you could cut it with your high dudgeon. Normally I’d be right there with you, fighting the good fight — and any fight that has capitalist pigs on the receiving end almost has to be a good fight. But as time goes by and I see more and more stories like this one, I’m increasingly seduced by the suggestion floated by the Economist a while back as to what the U.S. tax rate on corporations should be.

0%. That’d be your zilch right there.

I swear I haven’t been kidnapped by Steve Forbes, nor have I been watching too much (i.e. any) Larry Kudlow. I still think the supply-siders were practicing voodoo economics, which you could maybe tell from the fact that Reagan never did put a dent in that federal debt, despite the rosy talk about gold coins trickling down from the skies. (That was actually nuclear fallout raining all over the U.S.S.R. when we — for God’s sake Rush quit touching yourself!) The Laffer curve doesn’t do it for me — I’d like to see the top personal income tax rate back up around 90%, where Eisenhower had it, the commie. Why did he hate America?

No, Grover Norquist and the gang are kidding around when they say that that everyone benefits from a tax cut on the wealthy; doesn’t do a thing for the economy other than widen the deficit and put upward pressure on interest rates. But on the corporate side, I can see how a lower tax rate might actually deliver a wider payoff. Suppose Apple’s tax bill for fiscal 2008 wasn’t $2 billion but zero; that’s $2 billion more Apple has to spend on R&D, right? More jobs for geeks, more iPods for the stores, more sales tax revenue for the states when more geeks buy more iPods? You feel me? It’s no different from pimping single-payer health insurance as a way to reduce the burden on businesses, shaving $1500 off the cost of that Chevy and giving GM a fighting chance to compete with Toyota. Or just throw $25 billion in the general direction of Detroit and hope for the best, whatever.

The other notion in that Economist article that got me rocking was that corporate taxes are so difficult to enforce, they’re almost not worth pursuing. If the war pigs at Halliburton are looking at a tax liability of $500 million, how much will they pay their lawyers and accountants to dodge it? Maybe $499 million? That just goes against the German in me, the one who’s always striving for a dirndl that fits efficiency. Instead of seeing the illegitimi move their headquarters to the Bahamas, just let them keep what they earn. I hope that’s not just my world-famous defeatism talking.

But Simons, how are we going to pay for this $370 billion giveaway, my imaginary liberal friend asks. I won’t pretend it will “pay for itself,” but I do think we’d see some benefits that its true cost would be, say, $200 billion. Then I get rid of the capital gains tax — I mean, get rid of the capital gains tax rate. Screw this 15% nonsense — if you made $500,000 selling your Lehman last year, you still owe us 39%.

The same as if you had actually earned it.

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