Pretty much every discussion of tax reform these days ends with an agreement that we need to broaden the base and lower the rates. Well, the White House today will release the broad outlines of a plan to do just that on the corporate side of the federal tax code.
According to advance info from this morning's NYT, the proposal will be to cut the current top corporate rate of 35 percent down to 28 percent, and to close a bunch of loopholes to make up the difference. Some other features include:
And therein lies the rub. It is widely recognized that many corporations already pay far less than the statutory rate -- from the WaPo story on the proposal:
Today, the U.S. corporate tax rate of 35 percent is one of the highest in the world, but an abundance of loopholes and deductions means that many companies pay far less than that -- or nothing at all. Companies in the United States pay almost half the taxes than companies do in other rich countries, compared to the size of the economy, according to the Organization for Economic Cooperation and Development.
Last I checked, we were collecting around 1.3 percent of GDP in revenue from the corporate sector. That's low both in our own historical terms (the average has been about 2 percent over the past few decades) and especially in international terms, despite the fact that we have a higher statutory rate. And it's not just the recession depressing corp revenues, though that's part of it, because corporate profitability is once again soaring.
This tells you two things. First, a lot of companies take advantage of the breaks in the code and second, getting to a revenue-neutral 28 percent will mean taking away a lot of those goodies.
Some of the biggies are accelerated depreciation, interest deductibility, the ability to pass corporate capital gains over to the individual side of the code (where it gets favorable treatment), and a bunch of international loopholes, like deferral -- the ability to avoid U.S. taxation by holding multinational profits overseas.
I don't think today's release will go into much detail on specifics, but the implication is clear: if those who have been clamoring for a lower corporate rate are serious, they need to step up and support these loophole closures.
In that sense, the White House's proposal creates an interesting political challenge. For years now, American corporations and their reps here in D.C. have been calling for a lower rate while at the same time availing themselves of billions in tax breaks that have kept them from paying the statutory rate. In my debates with supply-siders, they're all about the rate... they're happy to trade more base for points off of the rate. In the next chapter of this debate, we'll get to see how much they meant it.
Everyone loves the first part of the mantra: lower the rates. Now let's see how the feel about the second part: broaden the base.
This post originally appeared at Jared Bernstein's On The Economy blog.
Robert L. Borosage: The President's Corporate Tax Reform Message: Say What?
Robert Reich: Corporations Don't Need a Tax Cut, So Why Is Obama Proposing One?
Jared Bernstein: Talking Point Alert!
Karen Dolan: Populism and Pain in Obama's Budget
Corporate Tax Reform Plan To Be Rolled Out By Treasury Wednesday
Obama Administration To Unveil Corporate Tax Reform Plan To ...
http://www.walkerreid.com/179d-tax-deduction/about-179d-tax-deduction
The " Tax Code" has been " Tax Fraud" for the last 90 Years!
Maybe just like the rest of the citizens of this adequate country. I pay about 13% of my wage to federal income tax. Is that what, for instance, Monsanto pays? That is at 25k/yr
Other than the unemployed, who are the ones not paying taxes? The dog musta eaten that paper.
I mean really I am one of the 53% ??
Ta Dah. No home, no savings, one car, and a job I have arrived in the future ! ! !
This will never get passed because these corporations know they can find ways to keep the money using loopholes so if the taxes were lowered and the loopholes taken away they would feel they did not have control of the money therefore they could not find ways to keep more.
They will fight it with everything they have.
Were the President sincere, he would defer the measure until after the election, or would have done it a year ago. Additionally, he'd have proposed doing it in two steps: first close the loopholes, then lower the rates. But he is not sincere; this is a pure political move. The game is: how far to the right can you go?
Then there's sole proprietorships and Subchapter S corporations, both of which lead to the "owners" being taxed at the "integrated" rate that you mentioned which is actually the progressive rate for income taxes. Small businesses and Subchapter S corporations aren't the ones outsourcing all of the jobs out of the country. Further, personal income tax rates aren't hurting competitiveness in the global market.
Not to mention, taxation considerations aren't a major factor in a business's decision to move jobs elsewhere. It's not like Steve Jobs moved jobs to China because of the tax rate there. He admitted himself that he wanted to take advantage of the "versatility" that the Chinese labor market offers. Of course, we now know that "versatility" is code for slavery.
http://www.theasi.org/assets/EY_ASI_Dividend_and_Capital_Gains_International_Comparison_Report_2012-02-03.pdf
You also mention, ‘Besides, there is no proven correlation between taxes on earnings distributions and investment. So that isn't the problem.’
There is definitely a correlation between taxes and economic growth and capital formation and distributions…that is why you have to look at integrated taxation because that is the way deployers of capital look at it….what do I get in my account at the end of the day.
Unless you are saying that taxes do not impact profitability and distributions….please do not tell me that is the meaning of your nonsense?
Kai
You mean there are three people with three businesses/incomes:
Big Bad Exxon: $100,000,000
You: $100,000
Me: $10,000
Posit Arguendo: I work for you, and you supply Exxon. And we are the universe of potential taxpayers and users of the common physical and non-physical infrastructure upon which we conduct business, remaining total GDP is 100,110,000 (100MM +100K+10K). The flat tax is 15%
At the end of the year, my tax is 1,500 (or 15% of 10,000), yours is 15,000 and Big bad Exxon is 15,000,000. Total tax receipts 15,016,500 or 15% of 100,110,000. Exxon made 99.8% of the GDP and paid 99.8% of the tax bill, you made 0.1% of the GDP and paid 0.1% of the tax bill.
We have all paid a fair amount for the relationship to our benefit from the underlying infrastructure. Exxon made more and paid more, you made more than I did and paid more. I made the least but was charged the least. Seems socially just to me, not only that it is equal and satisfies the equality under the law principle of the Constitution. There is no protected individual or institution in this case we all pay per our share of the GDP or National Income.
What you want is inequality, the opposite of social justice, you want one group of Americans to pay more and another to pay less. You want favorites….that is socially unjust.
Kai
The only rationale I can come up with is that it's a deduction that benefits small businesses moreso than the big corps who have their lobbyist machine. A larger corporation might be more likely to rely on public offerings to finance expansion, thus circuumventing the need for capital loans. Whereas, said loans are all that small businesses have other than retained earnings which are slim to none for mom and pop places anyway.
That argument would hold that since publicly traded corporations can raise capital by selling stock, their borrowing is optional and therefore not--not what, not morally deserving of being treated as a cost of production?
Better talk to a priest or rabbi about what is moral. Right now we are talking about what is legal and constitutional. What a business pays out in interest for a business loan is still a cost of production and not income,.
You and I and everyone else who understands taxation, and has a regard for the 16th Amendment, know that income is not the same as gross receipts. Income from a business is what accrues to the owner after the costs of production are subtracted from gross receipts. If we have borrowed money to set up or operate our business, then interest expense is a cost of production.
It is an embarrassment to recite these things. It is as though one were trying to explain something to an idiot child, but after all, it is leftists we are countering..
Corporate taxes are stealth taxes on their customers and represent ONLY ELEVEN PERCENT of federal revenues.
The remainder of federal revenue comes directly from citizens: income tax, medicare/medicaid tax, social security tax.
I love how you hypocrites can spin it all back to the other guy
~ We Have The Highest Tax Rate In The World ~ except for the ones who pay NOTHING
We're doomed if we don't get what we want because we're childish little brats and will blow it all up
Tax and spend ~ Democrats ~ builds infrastructure a healthy workforce and a strong nation
Borrow and waste ~ Republicans ~ to buy pretty fireworks and go around blowing things up like the economy and other peoples countries
1 F-22 stealth fighter costs $500M each plus 25yrs fuel and maintenance We have 180 of them They're defective and have never flown a combat mission Thats 180 Solyndras who had a product that was superior in design and energy production but we killed it because it wouldn't turn a profit in the two years we invested in it
Maybe the Chinese can make it work They're using our machines and old design for silicon based panels because they subsidise their companies in order to kill ours Then we export the factory
Canada and Germany have strong unions small business support Make their own products and have net export while your answer is to
Burn the country in order to save it
Doubling down on stupidity is the Right-Wing order of the day and you guys do follow your orders Thinking for yourself just gets in the way
Mitt hasn't ever bought anything, he has people for that. He has no idea what food & utilities cost, or gas, or groceries- and why should he care? No, he's not the only politician, just the only one whose tax rate I read.