Larry Kudlow (who is currently Trump's National Economic Council director) had proposed in 2014 zero corporate income tax, arguing that
Readers know that corporate tax reform is my single-favorite pro-growth policy. Actually, I'd like to abolish the corporate income tax altogether — including all the cronyist, big-government special favors, carve-outs, deductions and exemptions. Out with all the K Street mischief.
You know who the biggest winners would be? Wage earners. That's right. Corporations don't pay taxes. They merely collect, and then pass on the tax cost in the form of lower wages and higher consumer prices.
Want to maximize wages? Forget the minimum wage and embrace corporate tax reform.
Kudlow is not the only one to argue for this. University of Maryland finance professor Albert “Pete” Kyle similarly stated in a 2017 interview:
Q. Is 20 percent the right corporate tax rate?
A. The right rate is zero. Taxing corporate profits makes aggregate economic output smaller and reduces economic growth.
Q: What’s been missing, misleading or overlooked in the corporate tax debate?
A. The debate about the corporate tax rate overlooks the fact that it is economically inefficient to tax capital by double taxing corporate profits. This motivates corporations to use too much debt financing, to move capital intensive operations overseas, and to hire lawyers and accountants to avoid taxes rather than hire professionals who can do something more socially productive with their skills.
The correct way to tax income, whether from capital or labor, is to tax the consumption that results on a one-time basis, when the consumption takes place. This can be done by eliminating the corporate profits entirely, replacing it with something similar to a value-added tax, with a payroll tax and Roth IRAs, or by allowing unlimited contributions to and withdrawals from 401-k accounts. The income is taxed once when it is withdrawn from the 401-k account and consumed.
I don't follow closely Kudlow's writings, so he may have even changed his opinion on that, but since zero corporate income tax is uncommon (worldwide--I think only some "fiscal paradises" managed to keep it zero long-term) what are some potential problems (political, economical) with this zero approach to corporate taxation?