Memo to Fox News & the GOP: America Has the Second-Lowest Business Taxes In the World

Last week, I appeared on Fox News to discuss Barack Obama's tax proposals. You can watch the clip here - and make sure to watch the end where Fox News tries to drown me out with music.

Not surprisingly, the "debate" centered around the false premise that Obama's tax cuts are actually welfare. I say that's false because - as I pointed out on the show - everyone pays some form of taxes, whether it's income, property, sales or payroll taxes. When you take all those taxes together, most working- and middle-class Americans pay a higher effective tax rate than the Warren Buffetts of the world (as Warren Buffett, by the way, readily acknowledges). So Obama's plan to pass refundable income tax credits is only a handout if you look exclusively at one slice of taxes - in this case, income taxes. But in the overall tax scheme, those tax credits are aimed at better equalizing the tax structure so as to diminish the gap between Warren Buffett's very low effective tax rate and Joe Sixpack's high effective tax rate. Only in the asylums of Fox News and Republican Party politics is reducing that effective tax rate gap billed as theft from the rich to finance "welfare."

This concept of effective tax rates (ie. the tax rate actually paid and enforced) is key to understanding the most telling part of this Fox News discussion - the part at the end where former Bush-Cheney spokeswoman Jennifer Millerwise Dyck parrots McCain campaign talking points about America supposedly having a very high corporate tax rate in relation to the rest of the world. This, says Dyck and fellow Republicans, is driving businesses to move offshore.

It sounds like a credible storyline, especially considering that officially, our corporate tax rate is somewhere between 35 and 39 percent. But, as always, the devil is in the details.

To know how high - or low - the effective tax rate is, you have to go beneath the top-line rate and account for all the loopholes, subsidies and write-offs - and the way to do that is by looking at corporate tax revenues as a percentage of a country's GDP. That way, you know how much corporations are actually paying as a share of your overall economy - in other words, you know the real corporate tax rate, not the fake one advertised by top-line numbers. And when you look at America's tax structure through this lens, you see that even the Bush Treasury Department admits we have the second lowest effective corporate tax rate in the industrialized world (see page 42 of this report).

Indeed, this explains the dissonance between Republican claims of "highest corporate income tax rate in the world" and the recent Government Accountability report showing that most corporations pay no corporate income taxes at all. The latter is the truth - most corporations don't pay any taxes because of loopholes, writeoffs and subsidies that allow them to effectively reduce that 35 percent corporate tax rate to zero. In fact, many profitable corporations actually collect tax rebates. But as I told Fox News, we don't hear criticism of that kind of "corporate welfare" from the Republican mouthpieces deriding Obama's middle-class tax cuts as welfare.

As you can see from the video clip, when the GOP parrot I'm debating throws out the standard "high corporate tax" canard, I revert to the actual facts over and over and over again, to the point where Fox News feels the need to drown me out with music at the end. And I was, of course, rewarded with the usual river of hate email from Fox News viewers, most of which reaffirmed the dittohead nature of the modern conservative audience in that almost every email included exactly two links purportedly "proving" the GOP talking point - one a link to U.S. News and World Report's right-wing business columnist, the other to the fringe Tax Foundation, a group funded by Scaife, Koch and the usual constellation of Wingnuttia's trust-fund babies. You'll notice that both of these sources focus only on the official tax rate, not the effective tax rate - deliberately misleading their readers about the facts.

The good news is that polling shows most Americans do not think the big problem facing our country is that wealthy corporations are oppressed by high taxes. That is, most Americans live in the "reality-based" world and understand that if anyone is winning big from the Bush-McCain tax policies, it is Corporate America and the super-rich. So if the GOP wants to attack Obama for trying to cut 95 percent of America's taxes - if they want to lash their electoral hopes to a promise to give Big Business another tax handout - then I say that's great. They are helping progressives build a landslide and an election mandate.

Comments

[donndublin]

The nine men surrounded the tenth and beat him up. The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

And that, ladies and gentlemen, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up any more. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

[1will]

And what is the unemployment rate for these nations that have higher taxes on businesses?

[lvdragonlady]

Which would explain why the stock market is tanking right now.................
GREED
GREED
GREED

Ha see what it has got them...............serves them right

[DuganS1]

Them? Do you realize that "them" includes every Americans retirement funds?

[Zeje]

Most Americans didn't have a choice when employers switched from defined pensions to 401Ks. Employees have been told that only by investing in the stock market can they be assured of a comfortable retirement. Bring back defined pensions! Retirees need economic security.

[francoise]

As a business owner, I'm always whining about the taxes I have to pay.

One day I had a look at what American businesses pay.

Your country is dreamland for businesses ! I calculated that if I had done the same profits in America as I made here in France, I would currently be twice as rich !

There's no welfare in America, there's wealthfare ;-)

[DuganS1]

The companies that don't pay corporate taxes are the ones that don't make any money. Why should a company pay taxes when it loses money? Second, the amount of taxes corporations pay as a percentage of gdp is not very meaningful because of the explosion of the number of S corps and LLCs where business owners pay taxes on their businesses on their personal income tax returns; that percentage also doesn't make sense in comparison to other countries because American citizens make so much more income than citizens in foreign countries.

[RoloTomassi]

Right, Dimbulb, 57% of domestic & 79% of foreign corporations doing business in the US [according to the GAO report] don't make any money...please, stow your GOP nonsense.

[DuganS1]

A large number of those companies don't pay corporate income tax, but rather pay on their personal income tax. I am one of those folks. How do people not realize this.? And what does this have to do with the GOP? A large number of Senate and Congressional Democrats favor a corporate tax cut. Haven't you heard D-Barney Frank talk about corporate tax rates being too high?

[swift goat pet for truth]

David:
Good for you for going on Faux.

To me it would be like voluntarily getting a root canal I do not need.

[joebhed]

David, If I understand the post completely, the end game of the corporate tax system and tax structure in this country is that US corporations PAY the second lowest level of taxes in the industrialized world.
"Effective corporate tax rate" sounds like gobbledy-gook to most Americans.

If I am right, why not change the message to:
American corporations PAY the second lowest level of taxes in the world.
We get that.
Again, if I am right.

[dctackett]

yeah, it requires better framing... American corporations actually pay the second lowest amount of taxes... some don't pay at all.

[LouisvilleLiberal]

Every time I hear Republican's getting excited about Obama's supposed tax increases, I remind them that all he is doing is letting the Bush tax cuts expire for the highest tax bracket. Even if McCain won, he would have a hard time extending the Bush tax cuts when they expire with a Democratic majority in Congress.

The fact is, this is not a massive increase in taxes. It's simply a return to the tax schedule of the pre Bush era. I think everyone would agree that the working class has suffered under the Bush tax plan....even rich people.

And, really, it's a 4% increase in the federal income tax on TAXABLE INCOME over $250,000 for a couple and $200,000 for a single person. 4% !!!! This is not going to prevent anyone from sending their kids to college for crying out loud !!

[DuganS1]

I'm for raising taxes on the top brackets, if for no other reason than that the country needs the money, but I guarantee you that taxes will be raised more than just the top tax bracket. As for the idea that the "working class has suffered under the Bush tax plan", I don't see how that would be possible. How do you figure that by the way? Is someone that makes $35k a year worse off because someone that makes $300k a year got a 4.5% tax cut?

[anelder]

The reduced taxes of those at 300K and over is supposed to trickle down into investments in business and resulting in more jobs. That's the fairy tale. It doesn't happen. Instead it allows those who benefit manage to get wealthier. If you don't see this as a problem all the talk in the world isn't going to make a difference.

A description of what's happening is that Capitalism, free enterprise, profit has turned into what is known as Profiteering. Now who do you imagine is the victim of this profiteering?

[montemalone]

$35,000/yr in 2008 is like $28,000.00 in 2000.
(conservative 3% annual inflation rate)
Thing is, most people didn't get a 25% pay raise.
If you made $35,000 in 2000, are you making $43,000 today?

(Before anyone nitpiks my math, I just estimated with my puny liberal elite brain.)

[LouisvilleLiberal]

I think America's rich need a nice long recession to remind them who their customers are. I think in 6 months, the Chinese will be wanting to send working American's stimulus checks so they can go to Wal-Mart.

[DavidJames]

David,

Great appearance on Fox News! You made a great Point!

Regards,

[Photofarm]

Sorry, but congress can only control income and FICA taxes, all other taxes are for state and local governments and should not even be discussed for national political races.

So in effect, you are only confusing the issue, and ignoring the problem, Washington DC politicians spend to much money.

[MatoSka]

Remember that hole that we've been digging for the last 30 years? Well, I think we just hit the water table, and we are in over our heads.

State finances are in dire straits. At least 36 states are experiencing fiscal stress.[1]

There are 29 states that closed shortfalls of $48 billion in enacting their fiscal year 2009 budgets (for the year beginning July 1, 2008 in most states). The shortfalls equaled 9 percent of these states" general fund (operating) budgets.
Since fiscal year 2009 budgets were enacted, budgets have fallen out of balance producing new, mid-year deficits in 22 states and the District of Columbia that total more than $11 billion or 4 percent of budgets.

At least 16 states have announced that they are expecting deficits for state fiscal year 2010 that so far total $18 billion, but that number is very low because it is very early in the year for most states to make such a projection and because revenue collections continue to weaken. Deficits during the downturn in the early part of the decade reached $75 billion and $80 billion in the second and third year of that fiscal crisis, and economic conditions are now projected to be significantly worse than they were then. Judging from the rate at which revenue is deteriorating and the history of prior recessions, the 2010 gaps are likely to be in the $100 billion range.

http://www.cbpp.org/10-20-08sfp-testimony.htm

[DavidJames]

Overspending. Are you kidding! Bridges falling into the Mississippi. Floods taking out major cities due lack of adequate levies. An educational system that is dragging our children into poverty.

The problem is as David points out, a immoral failure of giant corporations to pay adequate taxes. It is time to make these corporations pay and pay more. Make them pay until they are small enough to drown in a bathtub!

[DuganS1]

Bridges are only a very small part of spending and the fact that some bridges are in disrepair is nothing more than a propaganda bit. And spending on education has increased dramatically over the past eight years, so i don't understand the comment about "dragging children into poverty". Where does that idea come from? As mentioned everywhere, corporations pay very high corporate tax rates to the federal government. To pay more will simply result in making our corporations less competitive vs foreign corporations.

[Brokenduck]

I think Mr. Sirota is smart enough to have brought that up if given the time. The problem is that on media platforms like Fox News (as well as NPR, et al. nowadays), back-and-forth discussions are for sound bites only, time-wise. The difference with Fox is that someone like Mr. Sirota has to not only answer the questions, but respond to absolutely ridiculous things being said on the other side.

And no.....state and local taxes have an important place in a national discussion, as states have been hit hard by national tax and economic policies over the last eight years.

[DuganS1]

How have states been "hit hard by national tax and economic policies over the last eight years".......?..

[mikep007]

And if you showed this to the average conservative- they would just shake their heads as they couldn't understand. They have been force-fed otherwise and this is beyond their comprehension.

[anelder]

What has really happened is those good and faithful republicans have shut down the brain and haven't picked up on how their party has changed in the last 30 years. Slowly but surely with the help of the Neocons their party has deserted their principles.

As for the far right issue of abortion and gay marriage they just don't get the fact that the President will have no say in how this goes. With 70 something percent of the public not wanting Roe overturned it just cannot happen. With gay marriage, again it can never become law of the land, never pass the amedment business (than you Lord) but will forever be a state's issue. Until of course someone gets it to the Supreme court. I imagine these voters are ignorant of how our system works. When they say, as I've heard, than we have to change the system I reming them of what it was like in the old days when religion and government were one. Don't they teach history anymore.

Ignorance is fixable and not shameful.

[gretchenart]

Don't we have the highest healthcare costs per capita? People do not stop to think that taxes do not have to be called taxes to have the same effect! While most of the world has single payor or other more effective healthcare plans than we do and don't pay extra for their healthcare, many of us pay thousands and thousands of dollars a year just in insurance premiums, not to speak of ever rising medical costs, drug costs, etc. Then there are fewer benefits at work with regards to pensions, unemployment, family leave, and other SOCIAL benefits, as the country "leaders" and stupid followers seem to think that anything that benefits society is a dirty word and that we should only care about lining our own pockets, and those of others like us, but cast out anyone different as unpatriotic, un American. Hence, the poor, minorities, democrats, Muslims and other non-Christians are all undeserving of the benefits of America! Only people wealthy enough to qualify for capital gains taxes are worthy of attention.

[Merewen]

Applause! Applause! Applause!!!

[sssmith]

When people stop rushing to the ER for breaking a fingernail, maybe we wouldn't have the highest per capita healthcare costs in the world. That is the difference between US residents and more sophisticated and socialist countries. Our society is just plain screwed up, and always will be; filled with people competing to the point of leaving anyone else in the dust. The same applies for healthcare administration. But in counterpoint to a sentence above, some more socialist healthcare programs worldwide are in fact less effective than that in the US, and they do find many doctors leaving in order to work in more favorable environments. The all-in cost to a taxpaying (eg. working) citizen for similar levels of care are basically equal between these countries and the US.

[Merewen]

What you find is Dr's leaving countries that UNH because they can't charge prices that want. You know... so they can pay for the boats, the Mercedes, and the Mansions. That's the only condistion that's not favorable to them! It's all about the mulah and nothing but the mulah. Don't get it twisted. In the meantime, you have US doctors advocating for a single payer system. Strange, don't you think?

http://www.pnhp.org/facts/why_the_us_needs_a_single_payer_health_system.php

http://www.thehealthcareblog.com/the_health_care_blog/2008/04/most-doctors-wa.html

http://prorev.com/2008/04/59-of-doctors-favor-single-payer-system.html

[Zeje]

And more Americans are traveling abroad to receive health care and treatment that they cannot afford here. More people are avoiding doctors and foregoing medications, even when they are seriously ill. Get your head out of the sand. The truth is, our system is much more expensive than any nationalized health care system.

[mmonarch]

Will someone pleases tell Obama this?

"the federal government's most useful role is not to rush into a program of excessive increases in public expenditures, but to expand the incentives and opportunities for private expenditures." - John F. Kennedy

[Merewen]

That's if they pay it. Remember that research you were talking about? 2/3 of US business don't pay taxes. 68% of foreign companies doing business in the US avoid paying taxes. Go peddle your Neocon sch-pill some where else. We're tired of the bull.

http://www.cbsnews.com/stories/2008/08/12/national/main4342535.shtml

http://abcnews.go.com/Business/wireStory?id=5561455

http://blog.aflcio.org/2008/08/12/we-pay-taxes-most-corporations-dont/

[vippy]

Tell Obama what, to keep on wasting money on wars, bailing out the rich, etc. With the biggest
defense plan in the world of course we won't have money for the citizens. Somehow someone
needs to balance it. People first, so they are worth protecting!

[mmonarch]

A little research would take you 5 minutes or less. Go to the non-partisan Tax Foundation website and actually read it.

When compared to other OECD countries:

24 U.S. states have a combined corporate tax rate higher than top-ranked Japan.
32 states have a combined corporate tax rate higher than third-ranked Germany.
46 states have a combined corporate tax rate higher than fourth-ranked Canada.
All 50 states have a combined corporate tax rate higher than fifth-ranked France.

[Merewen]

That's if they pay it. Remember that reasearch you were talking about? 2/3 of US business don't pay taxes. 68% of foreign companies doing business in the US avoid paying taxes. Go pettle your Neocon schpill some where else. We're tired of the bull.

http://www.cbsnews.com/stories/2008/08/12/national/main4342535.shtml

http://abcnews.go.com/Business/wireStory?id=5561455

http://blog.aflcio.org/2008/08/12/we-pay-taxes-most-corporations-dont/

[chillingaz]

Merewen, Tell Mmonarch like it is!!!!!

[mmonarch]

I went to some reputable sites, not TV stations or AFLCIO. And unlike many people on these blogs, I will admit and stand corrected on SOME of what you said. However, if you check out Bloomberg he gives you a very real example of when big corporations don't pay taxes - when they lose money i.e. Ford Motor Co. If you lose money you don't pay taxes. And it still comes down to this, we need to encourage business.

[DuganS1]

A large number of those businesses don't pay corporate tax because they are S corps or LLCs that pay taxes on the owners personal income tax.