The Smarter Way to Tax the Rich? Why Economists Are Eyeing Corporate Taxes Instead

How should America tax its richest? For years the debate has circled wealth taxes and levies on unrealised gains. Now a growing camp of economists argues there is a smarter target: raise the corporate income tax instead — and the numbers behind the idea are striking.

The $4 Trillion Proposal

As reported by Traders Union from Financial Times analysis, the proposal centres on increasing the federal corporate income tax — currently 21 percent — by 6 to 9 percentage points, but only for fewer than 2 percent of corporate taxpayers, the largest and most profitable firms. Combined with base-broadening reforms, the Penn Wharton Budget Model estimates it could raise roughly $4 trillion over a decade, about 0.9 percent of GDP.

The argument for it is elegantly simple. A nationwide corporate tax increase reaches more than 95 percent of corporate taxable income, while dodging the weaknesses of wealth taxes: billionaires can relocate, “temporary” levies have a habit of returning, and taxing unrealised gains faces steep constitutional objections from a Supreme Court seen as sceptical of such measures — not to mention the practical nightmare of valuing unsold assets every year.

The Counterarguments

Critics have ammunition too. Corporate tax receipts have actually been falling: the Congressional Budget Office found receipts dropped 25 percent — $96 billion — over the first 11 months of the fiscal year, partly because investment incentives in recent legislation let firms deduct more. And polling commissioned by the RATE Coalition suggests voter support for corporate tax hikes collapses once people hear the effects framed as lost jobs, higher prices and hits to retirement savings.

There is also the competitiveness question. In the two decades before the US rate was cut, nearly 100 American companies moved headquarters abroad to escape high taxes. Any increase would need serious international coordination — stronger country-by-country minimum taxes — to prevent profit-shifting from eroding the base.

Why Business Owners Should Care

Whatever emerges will reshape after-tax returns for years. The smart move now is scenario planning: model your business under a 27 percent rate, review how much of your structure depends on current deductions, and watch the international minimum-tax negotiations as closely as the domestic debate. Tax policy is slow — until, suddenly, it is not.