Thorndike, Joseph J., “A Trade-In for the Corporate-Income Tax: Echoes,”, 09/30/11

“…The corporate tax has been wearing out for some time. Its contribution to total federal revenue has declined to just 8.9 percent in 2010, from a postwar high of 30.5 percent in 1953. As a share of gross domestic product, it has fallen to 1.3 percent in 2010 from 6.1 percent in 1952.

Current proposals for the repatriation of overseas profits (which remain untaxed as long as they stay offshore) are just another sign that the corporate tax is nearing the end of its useful life. If gutting a tax every three or four years is the only way to keep it functional, then what does that tell us about the tax itself?

So what’s the best way to get rid of it? The U.S., with its dire fiscal outlook, is in no position to simply repeal the levy. Clearly, some sort of replacement is necessary.

Luckily, one is available. A federal value-added tax could finance a gradual retirement of the corporate-income tax. Initially, even a modest VAT could be used to dramatically reduce marginal rates. According to estimates from the Tax Policy Center, a think tank based in Washington, a broad-based 5 percent VAT could pay for a reduction in the top corporate rate to 7.4 percent. Eventually, lawmakers could repeal the tax entirely.”