On this morning's Morning Joe, Erin Burnett reported on corporate tax havens, where American companies are stashing $700 billion in corporate wealth. But don't expect much outrage from the General Electric Infomercial Hour:
SCARBOROUGH: They tell me though it's all legal - ALL LEGAL.
BURNETT: Of course it is.
SCARBOROUGH: There's a big difference between tax avoidance and being an all out tax cheat.
BURNETT: That's right. Isn't it your obligation in this country - there is a tax code for a reason, to take advantage of every bit of it you can and pay as little as you can.
Look, there was a hint of the sarcastic on display. But at the root of this, is Burnett's suggestion that American companies are justified in relying on tax havens because corporate tax rates are so high, relative to those of other countries.
BURNETT: Everyone likes to say American companies tax dodge, and no doubt they do, and the tax system could use massive reform, I don't think anyone would debate that, but the average tax rate paid by American companies...as of last year, it was right up around 30-plus percent. They are supposed to pay 35%. The average in other countries is significantly lower. So that is something to think about when people talk about tax avoidance by major U.S. companies.
Is that something to think about? See, I would think about the fact that if you can expect corporations to avail themselves of tax havens when the rate is 30-plus-percent, there's no reason to believe they'll stop doing that if their rates get cut. So, close the loophole and capture the revenue.
During the presidential campaign, we heard from McCain surrogates on this matter all the time. How many times did Carly Fiorina suggest that it was unfair that U.S. companies weren't taxed like they are in Ireland? Naturally, you'd have to suspect that Fiorina was talking blarney, and so is Burnett. From Ben Furnas at Wonk Room:
Now, new IRS data shows typical American companies paid only 25.3 percent of their U.S. book income in federal corporate taxes in 2005, despite a statutory corporate tax rate of 35 percent, by using loopholes and shelters.
U.S. companies "reported about $1.35 trillion in pretax U.S. book income to their investors in 2005, but about $1.03 trillion to the IRS -- a difference of about 23%."
And if you take a look at Furnas' chart, you'll see that Ireland, the land of leprechauns and the world's Ideal Corporate Tax Rate, has a higher amount of corporate tax revenue as a percentage of their GDP. They're able to do this because they don't have the thicket of loopholes and shelters that U.S. companies use to not pay their taxes. So, Burnett has it right when she suggests the tax system needs massive reform. I just doubt that anyone who honestly believes that ones "obligation" is to pay as little tax as possible would cheer the closing of these loopholes.
In Praise of Irish Corporate Taxes [Matt Yglesias]