(Original Post)
Jack Temple
There's a new video out this week from a group called the RATE Coalition making the case for a lower corporate income tax. The video is worth watching -- not because it provides any original defense for changing the corporate tax code, but because this group is rapidly gaining influence in Washington (despite the fact that it was just started early last fall), and my guess is we'll be hearing much more from them in the near future.
The video starts off by arguing that, with a 35 percent corporate income tax rate, the U.S. is "on track to have the highest rate in the world." It's surprising to see the member corporations of the RATE Coalition complaining about high taxes, since many of them actually pay no income taxes at all: according to a recent report from the Citizens for Tax Justice, Boeing and Verizon (both members of RATE) paid absolutely no taxes on their incomes from 2008 to 2010. Another RATE member, Time Warner, paid no taxes in 2008 and paid an average of 3.8 percent in income taxes from 2009 to 2010.
And these RATE folks are not alone -- fully 78 of the 280 most profitable U.S. corporations had at least one income tax-free year between 2008 and 2010. By taking advantage of offshore tax shelters and piles of deductions and loopholes, these 280 corporations together paid an average of 18.5 percent in taxes on their incomes between 2008 and 2010, far below the 35 percent statutory tax rate and even less than the 20.4 percent rate paid by the average American household.
So, again, it's not clear how exactly the corporate tax rate is too high -- the only way some of these RATE guys could be treated any better by the corporate tax code is to have American taxpayers start actively subsidizing their profit margins.
All of this data on effective tax rates also makes clear how distorted their next claim is: according to RATE, excessively high corporate taxes are responsible for pushing American jobs overseas. But given that, according to the RATE Coalition's own video, the average corporate tax rate worldwide is 25 percent, the U.S. actually has an exceedingly competitive income tax.
While these distortions are obviously important to highlight, it's their last claim that I find most disturbing: the RATE video argues that U.S. corporate income taxes are "hurting America's growth potential." I'm not sure what they mean by "growth potential," but if they think that income taxes are hurting corporate profits, then this group is seriously delusional: corporate profits rebounded to their pre-recession heights way back in June of 2010, and just last week they literally set a new record, totaling $1.97 trillion in the third quarter of 2011. It's worth noting, however, that due to aggressive tax avoidance, federal revenues from corporate taxes remain well below their pre-recession levels.
Which brings me to my last point. The acronym "RATE" stands for Reforming America's Taxes Equitably. While corporate profits are busy breaking records in the wake of the recession, household income last peaked in 1999 and remains 7.1 percent below that peak today. You'd have to live in a world totally divorced from the realities of middle class life to think that "equitable" tax reform means handing out more perks to those with record-breaking wealth.
Of course, if you're an aggressive tax dodger based out of Wall Street, that might just be the kind of world you live in.
Date January 11, 2012