Corporate Taxes

It’s common to hear from Republicans that corporate tax rates are too high in the U.S.  Aside from the fact that reasonable corporate tax rates are an important way of incentivizing corporations to re-invest profits, this claim is largely gibberish.  It leaves out all of the tax breaks, tax loopholes and tax giveaways, by which corporations avoid paying taxes.  Think Progress reports, for example, that ExxonMobil paid no corporate income taxes in 2009 and that companies like GE, CitiGroup, Wells Fargo, Bank of America, and Boeing have had entire quarters or years without paying corporate income taxes.

Corporate taxes in the U.S. constitute 1.8% of Gross Domestic Product, according to the CBO.  The international average, by contrast, is 3.4% of GDP (without controlling for size of the economy) or 2.5% of GDP (controlling for the size of the economy).

Meanwhile, corporations are collectively sitting on $2 trillion, and President Obama is reduced to futilely cajoling them into lending it out or somehow investing it in job creation.  The government has a tool to create this incentive:  corporate taxes.  Unless corporate taxes are reasonably high, corporations have little incentive to re-invest their profits.  But, in order for this to happen, it will probably first be necessary to beat back the lie that American corporations pay disproportionately high taxes.

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