by Linda Beale
The press is covering the GAO‘s latest report on corporate taxes: Corporate Income Tax: Effective Tax Rates Can Differ Significantly from Statutory Rate(May 30, 2013). The study, looking at income and taxes reported in financial filing statements for 2008-2010, was conducted because
Proponents of lowering the U.S. corporate income tax rate commonly point to evidence that the U.S. statutory corporate tax rate of 35 percent, as well as its average effective tax rate, which equals the amount of income tax corporations pay divided by their pretax income, are high relative to other countries. However, GAO’s 2008 report on corporate tax liabilities (GAO-08-957) found that nearly 55 percent of all large U.S.-controlled corporations reported no federal tax liability in at least one year between 1998 and 2005. Id. (from “highlight”).
The report looks good for corporations. The GAO report shows that corporate taxes paid to the US are going down, down, down. Corporations paid 15.3% in 2008, 13% in 2009 and only 12/6% in 2010–that’s less than have the corporate tax rate of 35% for each of those years! The proportion of federal revenues raised from corporate taxes has been decreasing over the years as well–the GAO reports that for 2012 it is estimated that corporate taxes will have raised only 242 billion, compared to 1.1 trillion in individual taxes and 845 billion in payroll taxes.
When you couple the very low corporate taxes actually paid with the very favorable preferential capital gains taxation to shareholders (including both dividends paid from corporations and sales of corporate shares), corporate shareholders–mostly the very top few percent that own and/or manage most of the financial assets–are doing extremely well. At the same time, ordinary Americans continue to suffer the impact of the recession. For those with jobs, we haven’t made up for the losses from the Great Recession. And for those without jobs, Republicans across the country are enacting measures to make them suffer even more–as though, as Paul Krugman notes, making them even more miserable would somehoe restore the economy. See Paul Krugman, War on the Unemployed, New York Times (June 30, 2013).
So why all that chatter about how high the US tax rate is (35% on corporations with more than about 18.4 million in annual income) and how it makes US corporations losers in the cutthroat global competition? That’s not hard to understand. Corporate managers like to have the profits earned from workers’ labor accrue to themselves and they don’t like paying any taxes. So no matter how low the effective tax rate already is, corporations will lobby for even lower statutory tax rates, using corporate resources that are available in part because of those tax policies favoring “paper” deductions for noneconomic depreciation, until they get the statutory rates down to zero (and the effective rates actually negative).
So why do our representatives in Congress buy into that sad-sack tale that really isn’t true–both in terms of the need to use any revenues generated by tax reform to cut the rates on corporate tax, and in terms of the refusal to eliminate the discriminatory preferential rate for capital gains that treats profits earned from having money as much better than profits earned from hard work? Because every time there is something for corporations and the wealthy to lobby for, there is also something for congressional representatives (and, importantly, their staffs) to use as a campaign fundraising tool with the corporate elite.
THe lobbying, and the campaigning, and the PR blitz supported by all those purported “think tanks” funded by the corporate and wealthy elite, where the “scholars” are paid to produce the “scholarship” to support the ideology that claims that the wealthy got that way on their merit and therefore merit continuing tax expenditure support for their activities from the government–it all fit together hand in glove to pave the way for yet another corporate tax break that will benefit managers and owners and leave workers high and dry.
Think about the recent brouhaha over the fact that the IRS gave closer scrutiny to 501(c)(4) applicants that were likely to be politicking organizations rather than do-gooder organizations as the exemption requires. That was all about keeping the big wealthy and corporate funders of politicking groups secret. When those groups are secret, it makes it more possible to influence elections with misleading or false statements without people becoming more skeptical because of realizing their source. And the more that goes on, the more those corporations can hobnob with Congress and let them know the items on their wish lists without much intervention from the unknowing public.
This is why the Baucus-Hatch “base broadening to support rate cutting” plan for “tax reform” doesn’t make sense. We don’t need to cut corporate tax rates. Let’s do some base-broadening, but use that revenue where it is really needed–to fund basic scientific research, to support public education, to fund needed infrastructure projects–not to give another tax break to multinationals and their owners/managers. For once, the country needs to think long-term rather than from election to election with campaign fundraising as the holy beacon.
cross posted with ataxingmatter