The current tax system is a grab bag of special favors and arcane regulations, often favoring specific companies and/or friends of politicians. The effective corporate tax rate hovers around 20%, yet outsourcing is rampant because CEOs covet even higher compensation. This does not benefit the U.S.
We should delete the entire current system, every last statute, and replace it with a system specifically designed to increase jobs and reduce favoritism.
The theory is rather simple in concept: corporate taxes would be inversely proportional to the percentage of American employees an entity has.
There would be two parts to the calculation, direct and indirect employees. The former refers to the American workers a company has on its payroll. This portion is straightforward. The latter refers to foreign parts and services a company uses to produce its products, and to partial and completed products a company imports to sell in the U.S.
Every company would be master of its taxes and could lower them simply by moving more operations to the U.S. We wouldn't need to worry about whether a company was American or foreign because the jobs a company brought to the U.S. would be the only detail of importance.
Some examples will help to illustrate the concept.
A company making furniture using American trees in the U.S. would pay zero tax. There wouldn't be too many companies on the zero end of the scale.
One of those we-ship-it businesses with more copiers than employees would still pay a decent tax due to the foreign-made products being sold and the foreign-made equipment in use. However, an owner could actively seek out American-made products and reduce his taxes.
Amazon and Walmart would pay hefty taxes because they import the majority of their products, even though they have a large number of employees in the U.S. All of the people producing items for Amazon and Walmart in foreign factories would be considered indirect employees.
Many companies, e.g. Target, Cigna, Comcast, and many airlines, would be a mixed bag, because while they have many employees working in the U.S., they also have customer service, IT, accounting and/or other departments in India. Target would be hammered because it imports most of its products.
Apple would pay a large corporate tax because all of its products are manufactured overseas, largely in plants which abuse their employees.
Companies such as Microsoft which have located a large portion of their business in India would pay a high tax rate.
Companies that only maintain a small office in the U.S. to track their foreign imports would pay a tax rate approaching 100%. The free ride would be over.
Employees using H-1B, L-1, and other business visas would not be counted as Americans. We'd have to force corporations to reveal the depths of their outsourcing and business visa use.
Speaking of free rides, we'd need to reverse the mindless acceptance of Uber's business model -- its investors and management hope to become a driving monopoly -- which is based on the federal government allowing it to ignore laws created long before ago with respect to labor agreements, not to mention its treating workers as low-paid contestants on Survivor. The best solution would be to force Uber to follow local agreements that taxi companies do, especially with respect to vetting its workers to prevent them burglarizing homes of passengers from Delaware to Denver and raping passengers from Boston to Anaheim. It is clearly unsustainable to allow companies to essentially transfer the salaries of middle class workers to CEOs and venture capitalists, not to mention that a senior executive proposed to dig up dirt on critics of the company, making it no different than Scientology.
Discussions would need to take place in order to assign the value of all groups of direct and indirect employees. Walmart would be relatively easy given that the vast majority of its employees, both in the U.S. and overseas, are not well-paid. Apple would not be so easy, given that its management would claim that most of the work was done by its American designers.
And we'd need to rework our free trade treaties to avoid bringing in Chinese-made products disguised as ones made by our treaty partner.
But the increase in employment would result in enormous gains for American companies, the way things used to be.