The U.S. business tax system is upside down. Banks and insurance companies and law firms are "taker" businesses that just shift ownership of things that already exist, and they use campaign contributions to bribe Congress into giving them tax breaks and low tax rates. In contrast, family farmers, manufacturing businesses, small software-development companies, and single-location restaurants are "maker" businesses that create things of value that previously did not exist, and they struggle to survive under the burden of excessively high taxes.
To turn things right-side up, and to make it more difficult for campaign contributors to get corrupt tax rates, Congress should phase out all tax breaks and subsidies for businesses, and phase in standardized business tax rates that are based on what the business does. Initially, to demonstrate its effectiveness, this tax reform can be adopted by a state that wants to increase its economic prosperity.
This business tax reform will reward "maker" businesses that make things of value that previously did not exist, which is deserved because "maker" business activities dramatically increase economic prosperity, especially by attracting money from outside the United States. At the opposite end, this tax reform will increase tax rates on "taker" business activities, which is deserved because many government activities are needed to protect customers and investors and the environment from the often-predatory "taker" businesses.
As a bonus, this tax reform will simplify the tax code.
Of course many business activities fit within the extremes of "maker" businesses and "taker" businesses, so the following range of categories identify the full range of taxation levels.
1: Farming (and ranching)
2: Making (manufacturing, cooking, creating entertainment, writing software, etc.)
4: Maintenance and healthcare
5: Communication and packaging and transportation and storage (including retail businesses)
6: Sales (and marketing)
7: Taking (banking, stock-market trading, providing insurance, providing legal services, payday loaning, real estate development, mining, etc.)
If a business has activities that fit more than one category, their tax rate would be adjusted accordingly.
Our upside-down business tax system exists because large "taker" businesses donate huge amounts of money to election campaigns, and in return elected politicians give them tax breaks and tax loopholes. Although legal, this corruption parallels what happened during the downfall of the Roman empire when rich people were able to avoid paying their fair share of taxes.
The data posted at OpenSecrets.org proves that "taker" industries give the largest campaign contributions. That data also makes it clear that those campaign contributions go to both the Republican and Democratic parties, both of which cooperate with this big drain on economic prosperity.
Although this tax reform will not directly affect individual income taxes, indirectly the incomes of rich people who participate in taker businesses are likely to be reduced. In contrast, people who become rich doing things that benefit many people are likely to become even richer, which will motivate more entrepreneurs to build the kinds of businesses that are beneficial rather than predatory.
For more details, please read the full description at Tax The Takers More Than Makers.
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