My libertarian and conservative friends like to remind me that America's corporate tax rates are oh-so-high. As they tell it, America's 35% tax rate on corporations stifles growth and innovation. They even suggest that our current high unemployment is being affected negatively by these burdensome corporate taxes.
The Reverend likes to deal in the actual facts....so here is a chart comparing corporate as well as personal income tax rates of the industrialized countries of the world....
Sure enough....although our income tax rates are among the lowest in the world, our corporate tax rates are among the highest. So....case closed.
Not so fast. 35% may indeed be the official U.S. corporate tax rate...but what is the effective tax rate that corporations actually pay? That would be a chart of a different color....
Well shiver my timbers....as a percentage of GDP, corporate taxes are at their lowest level in...ummm....recorded history.
Well, you ask....how can that be? If the corporate tax rate...at least on paper...is 35%, how can corporations be paying the lowest corporate taxes in modern history?
Therein lies the rub.
If you really want to know how these apparently contradictory propositions can exist simultaneously....you need to read this from Thursday's NY Times.
In the Times article you will find that American corporations' share of all federal revenue has dropped from 30% in the 50's to 6.6% in 2009.
In 2009, Bank of America paid zero federal income taxes. Boeing didn't pay any corporate taxes between 2008-2010. CitiGroup paid zero taxes in 2010 even though their highest paid executive received a compensation package worth $9.5 million....two years in a row. Exxon Mobil paid a total of $15 billion in taxes in 2009...but not a penny went to the U.S. Treasury. General Electric, the world's largest corporation paid nothing in taxes to the U.S. government in 2009. Wells Fargo, the fourth largest bank in the nation paid zero taxes in 2009.
Even worse....GE, while not paying any federal taxes in 2009.....received FROM the government a tax subsidy of $3.2 billion. American taxpayers paid GE while GE made $14.2 billion in profits.
If you are prepared to really be pissed off.....go here and see how Google launders it's corporate money around the world....and comes away paying 2.4% in taxes. Tax evasion at it's finest...or not. Google's tax evasion game playing employs fun terms like "Double Irish" and the "Dutch Sandwich." Money shuffling at it's finest....or not.
Microsoft and Facebook play the game as well....
The method takes advantage of Irish tax law to legally shuttle profits into and out of subsidiaries there, largely escaping the country’s 12.5 percent income tax.
How can this go on? How can huge American corporations pay no taxes while making billions in profits?
From the Times article on GE.....
(GE's) extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore. G.E.’s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world’s best tax law firm. Indeed, the company’s slogan “Imagination at Work” fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress.
The revolving door of government-to-private-corporations has created an incestuous mess where wildly profitable companies escape paying taxes. Corporate lawyers and accountants, once employed in federal agencies, game the system and write the tax laws that our corrupted elected officials pass.
It's all because of the oligarchy. Corporate titans and elected officials working hand in hand....not to advance the will of the people....but to advance the will of select flush corporations. Hundreds of billions of dollars are lost from the U.S. Treasury because of these corrupt paper shuffling games which are no better than legalized larceny.
Finally, to those conservatives out there who insist on singing their Johnny-one-note tune "corporate taxes are too high"......and also cherish the legacy of one Ronald Maximus Reagan.....consider this....
In the mid-1980s, President Ronald Reagan overhauled the tax system after learning that G.E. — a company for which he had once worked as a commercial pitchman — was among dozens of corporations that had used accounting gamesmanship to avoid paying any taxes.
“I didn’t realize things had gotten that far out of line,” Mr. Reagan told the Treasury secretary, Donald T. Regan, according to Mr. Regan’s 1988 memoir. The president supported a change that closed loopholes and required G.E. to pay a far higher effective rate, up to 32.5 percent.
Yes, Maximus...they did get out of hand. And in the go-go 90's when not just Republicans...but also Democrats, began feeding at the corporate hog-trough in earnest, things got even further "out of line."
So far out of line that now not only does billionaire Warren Buffet pay a tax rate lower than his secretaries...but many of America's largest corporations who make billions in profits every year pay nothing in taxes.
Put all of that into your "corporations-are-being-stifled-by-high- corporate-tax-rates" pipe and have yourself a good ole' smoke.
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