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Today's Top News
The Mindless Mantra of Wall Street: The Corporate Tax Rate Is Too High
(A 35% corporate tax rate means zero taxes. So go ahead, cut it to 25%.)
In 2010 General Electric made $14 billion and received a $3 billion tax refund. The response by business? The 35% corporate tax rate is too high. Tax cuts, they continue to say, will spur economic growth and create jobs, and allow American companies to compete in a global economy.
All very emotional. But the facts can be found in U.S. Office of Management (OMB) figures, which show a gradual drop over the years in Corporate Income Tax as a Share of GDP, from 4% in the 1960s to 2% in the 1990s to 1.3% in 2010. The unweighted global average in 2005 was 3.4%.
Also coming from the OMB is the percent of Total Tax Revenue derived from corporate taxes (OMB Historical Table 2.1). The corporate share has dropped from about 20% in the 1960s to under 9% in 2010.
Finally, in a U.S. Treasury report of global competitiveness (Table 5.3), it is revealed that U.S. corporations paid 13.4% of their profits in taxes between 2000 and 2005, compared to the OECD average of 16.1%. (Although the Tax Foundation notes that tax rates of other nations have fallen while the U.S. has remained unchanged.)
The Treasury Dept. report is consistent with a PayUpNow.org analysis of the 10-K financial statements of 100 of the largest U.S. companies, which found that less than 10% of pre-tax profits in 2010 were paid in non-deferred U.S. federal income taxes.
These 100 companies, with $5.67 trillion in 2010 revenue and almost $600 billion in pre-tax earnings, paid $57 billion, or 9.7%, in federal incomes taxes. If these 100 companies had paid the 35% tax designated by U.S. tax law, an additional $150 billion would have been collected in federal taxes in just one year. This is approximately equal to the total budget deficits for all 50 states.
From 2008 to 2010, Chevron paid less than 5% a year. Merck paid 5%. Hewlett-Packard 3%. Exxon 2%. IBM 2%. Carnival 1%.
Verizon and Boeing and Dow and DuPont all made profits three years in a row, but all paid zero taxes over the three-year period.
Banking leaders Citigroup and Bank of America, with a combined $8 billion of pretax earnings in 2009 and 2010, each paid zero taxes two years in a row.
So go ahead, cut the corporate tax rate to 25%. 25% of zero is the same as 35% of zero.
But if it means anything to the corporate CEOs, the United States is where you built your companies, utilize the infrastructure and transportation systems, benefit from years of scientific research, and make most of your sales.
Your tax avoidance may be 'legal,' but it's taking down our country.