November 30, 2014 by David K. Sutton
Right-Wing Lies: Robert Reich On Corporate Tax Rate Reform
Robert Reich is always an interesting read, and he regularly offers up great mini articles in the form of Facebook status updates. Today Reich gives us four “right-wing whoppers about corporate taxes.”
1. The U.S. corporate tax rate of 35% is one of the highest among advanced countries. True but misleading. The effective corporate income-tax rate – what corporations actually pay after all deductions, credits, and loopholes – is 27.7%, close to the average of all rich countries (27.2%).
You will rarely hear a fiscal conservative offer up the effective corporate tax rate. Why? — It would hardly help them make their case for lower corporate taxes. They want you to hear that 35% is among the highest corporate tax rates in the world. That’s all you need to hear as far as they are concerned. And you have to believe they think lower corporate taxes would help the economy, because otherwise they are nothing more than cronies for wealthy interests.
2. Today’s corporate tax rate is high by historic standards. Baloney. In the 1950s it was over 50%.
They try to sell this BS when it comes to any tax. Right-wingers, believe they are “taxed enough already.” That’s where the TEA in Tea Party came from. For anti-tax evangelicals, taxes are always high, even when reality and statistics say otherwise.
3. The corporate tax reduces corporate profits, which makes it harder for corporations to hire. Wrong. Corporate profits today are the highest they’ve been since World War II as a percentage of the economy.
Obviously people are not paying attention when the news reports the latest record corporate profits. Yes, it’s true many people are still struggling in this economy, but the biggest and wealthiest corporations are not among the languished. They are raking in incredible profits, and in some cases paying well below the “effective” corporate tax rate. In fact, some large corporations have effective tax rates that are single digits, or even zero. How would corporate tax rate reform help these companies? Seems to me the government is already offering them an incredible gift. That’s not enough?
4. Lowering the corporate income-tax would spur economic growth. Baloney. There’s no relation between corporate tax rates and growth. In the 1950s and 60s, when the corporate tax was over 50%, the economy grew faster (at an annual average rate of 3.9%) than it has since the rate was reduced.
Again, the same BS fiscal conservatives use for all taxes. They ignore that individual tax rates as well as corporate tax rates were once higher, and it did not hurt the economy. As far as the right-wing is concerned, lower taxes is the only solution for economic and employment growth. They’ve got nothing else. They’ve got no back-pocket alternatives. And this is dangerous, because if fiscal conservatives get their way, taxes get lowered, services get underfunded, which means people in dire economic situations suffer. And if the economy doesn’t improve like they say it will, again, their only solution is to cut taxes further. For fiscal conservatives, the reason their lower tax strategies haven’t yet worked is because we haven’t been willing to cut taxes enough to see it work. Again, that’s an incredibly dangerous ideology.
So, we shouldn’t reform corporate taxes then? — Actually, I’m fine with reforming corporate taxes, if it means leveling the playing field for small corporations while maintaining or expanding the percentage of federal revenue that comes from corporate taxes. See, right now corporations are paying a historically low percentage of overall federal taxes. That means you and I are paying the difference. The problem is that large corporates have an army of lobbyists that help shape tax code, and another army of tax lawyers who parse that corporate-friendly tax code. That needs to end. The effective corporate tax rate should not be based on ability to hire a small corporation’s worth of people who exist solely to ensure the smallest tax bill possible.
So yes, we can have corporate tax reform. It can even mean the tax rate comes down from 35%. But corporate tax reform must not allow large corporations to continue to pay feeble effective tax rates. If a small corporation’s effective tax rate is 25%, or 30%, that too should be the effective tax rate of a large corporation. That is REAL corporate tax reform.
