Daedalus made a comment over at Troy’s place that I would like to explound upon beyond what might be appropriate in a comment section:
I agree with you in principle that it is counter productive to tax corporations, but it does raise the question of what is the moral way to pay for the limited but essential services of a government.
This begs the question, what are the limited but essential services of a government? To my mind, the principle purposes of our Federal Government are national defense, a court system to adjudicate interstate and international disputes, customs and immigration, and to coin and regulate the value of real money (this last duty was abdicated by Congress in 1913 and we are currently in the throes of paying dearly for that folly). 90% of all else they spend money on is beyond their legitimate purview and of no value to me whatever. I thus guiltlessly avoid paying my share of the ridiculous cost of such by any means available to me.
To answer John’s question, I suggest user fees. If we are to be the policeman of the world, how about renting out our forces to those allies who chose not to spend their blood and treasure on their own defense. Didn’t we turn a profit providing the mercenaries for the first Gulf War, when the free world ponied up the cash for us to kick Saddam out of Kuwait? If the Europeans need our troops stationed in their countries to protect them from Russia, shouldn’t they be paying us for the service, rather than us paying rent for the bases?
Now that Saddam has been eliminated, Saudi Arabia, Kuwait, Jordan, et al are desperate for us to stay in the theater to protect them from Iran. Instead of sending them $700B a year for their oil, perhaps we could work out a fair trade for our protection racket. Piracy is on the ascendency again; perhaps the worldwide shipping industry should help fund our Navy.
The court system could easily be funded by user fees. A “loser pays” (full) court cost system could be arranged. This would have the secondary benefit of reducing the load of frivolous lawsuits. Better yet, anyone wishing their contracts to be protected by US courts could be required to purchase such protection in advance in the form of tax stamps that must be affixed to all the documents. This could easily be turned into another profit center, and private enterprise could compete with arbitration services.
Infrastructure such as Interstate Highways (obstensibly built for our military) and National Parks are already funded by user fees (gasoline taxes, entry fees, etc.). Any that are not, should and could be.
Customs and Immigration should be funded by tarrifs, duties, and port of entry fees. Even illegal immigrants spend a fortune in bribes and coyote fees to get here, so legitimate immigrants and tourists could pay a fee to cover the cost of these services. Perhaps they should be high enough to fund our State Department too, since our embassies are much involved in the visa business.
I know nobody who objects to paying for governmental services they actually use, unless the politicians are wasteful with their funds. On the local level, property taxes are willingly paid to fund police, fire, and legitimate infrastructure that is universally used by the public. It is the pet projects for special interests that raise taxpayer ire.
Finally, for any legitimate function I may have overlooked that doesn’t lend itself to user fees, and any defense costs not covered by foreign payments, I would recommend a retail sales tax like the “Fair Tax” proposal. As I illustrate in my taxes essay, the consumer ultimately pays all taxes anyway. Even with all the waste, fraud, and abuse our politicians currently perpetrate on us, enacting the Fair Tax would end our financial crisis overnight, as all the offshore capital came rushing back to our income-tax-free shores. ◄Dave►