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Three lies about the need to lower corporate taxes

Robert Reich, professor of public policy | August 6, 2013

Instead of spending August on the beach, corporate lobbyists are readying arguments for when Congress returns in September about why corporate taxes should be lowered.

But they’re lies. You need to know why so you can spread the truth.

Lie #1: U.S. corporate tax rates are higher than the tax rates of other big economies. Wrong. After deductions and tax credits, the average corporate tax rate in the U.S. is lower. According to the Congressional Research Service, the United States has an effective corporate tax rate of 27.1%, compared to an average of 27.7% in the other large economies of the world.

Lie #2: U.S. corporations need lower taxes in order to make investments in new jobs. Wrong again. Corporations are sitting on almost $2 trillion of cash they don’t know what to do with. The 1000 largest U.S. corporations alone are hoarding almost $1 trillion.

Rather than investing in expansion, they’re buying back their own stocks or raising dividends. They have no economic incentive to expand unless or until consumers want to buy more, but consumer spending is pinched because the middle class keeps shrinking and the median wage, adjusted for inflation, keeps dropping.

Lie #3: U.S. corporations need a tax break in order to be globally competitive. Baloney. The “competitiveness” of American corporations is becoming a meaningless term because most big U.S. corporations are no longer American companies at all. The biggest have been creating way more jobs abroad than in the U.S.

A growing percent of their customers are outside the U.S. Their investors are global. They do their R&D all over the world. And they park their profits wherever taxes are lowest — another reason they pay so little in taxes. (Don’t be fooled that a “tax amnesty” that will bring all that money back to America and generate lots of new investments and jobs here — see item #2 above).

Corporations want corporate tax reduction to be the centerpiece of “tax reform” come the fall. The President has already signaled a willingness to sign on in return for more infrastructure investment. But the arguments for corporate tax reduction are specious.

Cross-posted from Robert Reich’s blog

Comments to “Three lies about the need to lower corporate taxes

  1. George Meredith MD says:
    To Cut Taxes: Sacrifice the Sacred Cows

    You want to preserve our AAA bond rating and rescue our crashing economy? Simple: spend less and sharply reduce taxes. The more we reduce taxes, the stronger and faster our economy will grow. The US has one of the highest corporate tax rates of all industrialized nations.

    Almost all taxes would come way down with the below listed plan. And all else is rhetoric! Forget about the Democrat’s pie in the sky “investments” in health care, high speed rail, solar, wind and biofuels. These are but big government, Chicago type pay to play scams!

    To revitalize our crushed economy, we must sacrifice the sacred cows. The sacred cows being the phony war on drugs, the phony wars in Libya, Syria, Iraq and Afghanistan and the corrupt Medicare and Medicaid health insurance programs.

    Therefore we must, post haste:
    • Repeal Obamacare, immediately….why spend a trillion dollars to buy health care for the 32 million Americans who are currently receiving it for free right now? The looming taxes to support Obama’s socialization of American medicine have sent a negative message to small businesses and financial markets alike. The repeal of Obamacare would send a positive message to these entities.

    • Give current Medicaid and Medicare recipients vouchers and let them purchase whatever health insurance fits their needs…this would cut the cost of these corrupt programs by an amazing 70%…and, would lower the health care costs for the rest of us by a whopping 50%! It’s called “cost shifting” and is the reason your health care costs are currently so high.

    • Enforceable, meaningful deductibles and co-pays would return Medicare and Medicaid patients to the real world medical marketplace! And would simultaneously cut the cost of commercial health insurance for the rest of us by 50%.

    • Recognizing the BCBS scam that Kathleen Sebelius and her lawyer pals ran in Kansas and in most other states, for years: issue a federal mandate that would allow patients to cross state lines, in order to purchase more competitive health insurance.

    • Sell all the government hospitals…Army, Navy, Air Force, VA, US Public Health Service…sell all the government hospitals to the highest bidder…and instead, give this group of patients commercial health insurance vouchers. In many cases, these patients would end up using the same doctors, nurses and hospitals but in more polite, goals oriented, professional settings.

    • Scrap the phony trillion dollar Medicare prescription drug program that Cheney, Rice and the rest of the Bush Crime Family left us with. . Instead, let the seniors buy the safer, much less expensive generic drugs.

    • Scrap the (Chinese) wind farm and gasohol programs. These programs are not, and never will be, cost effective. If economically viable, let them stand on their own…without any government subsidy.

    • Tell OPEC where to get off by imposing an adjustable energy import tax. The less you charge us, the less we tax your products. And vice versa…..

    • Open up the Dakotas, west Texas and elsewhere for more horizontal drilling, in order to tap our nation’s vast untapped natural gas and petroleum reserves.

    • Structure gasoline and diesel road taxes so as to encourage the use of our abundant natural gas resources for surface transportation.

    • Abolish redundant, counterproductive programs: Departments of: Homeland Security, Education, Labor, Energy, Commerce, ATF, IRS, TSA and Federal Courts.

    • Remove all unions from all mass transit in America. Tell transit workers that efficient, privately run mass transit, free of unions, is a matter of national survival.

    • Begin war crime trials for those who corruptly got us into these unconstitutional foreign entanglements. Specifically the Bush Crime Family and the Clinton Crime Family Send such people a message: no more foreign wars when our strategic national interests are not at stake. We can no longer afford to be the world’s policeman.

    • Call a halt to the phony war on drugs and the corrupt judicial-prison industry that it supports. It’s a war on our own citizens. The war on drugs has several purposes, but the main reason is an excuse to beef up the police into a paramilitary force. It’s a total scam. The politicians want to claim they’re tough on crime. We all know, the fact that drugs are illegal drives the price up. High prices create crime.

    Do these things and, bingo, our economy self rights itself almost overnight. Or continue with the Hillary Clinton-Barack Obama pie in the sky programs and we are cooked.

    George Meredith MD
    Virginia Beach

  2. Okay Professor, how can this message go outbound to the masses? Because the money is in the corporate coffers to continue to drown out the truth, do we to need stand on every corner so that people on the ground can get educated?

    It just seems to me that the middle class is unmatched unless we come up with something unique and powerful..? It’s very frustrating, getting organized is great,but daunting…

  3. The moment Citizens United was decided, our United States Congress, Supreme Court and Military-Industrial Complex were sold to the highest bidder and all principles, rules or beliefs that governed our behavior were abandoned. Now, our children are facing a future of economic and social chaos, unless their elders are willing to stand-up like the adults, we are suppose to be.

  4. Okay, the Prof’s voice represents a sober assessment; people like me are informed. But what’s next? I feel more hopeless because politics are played by who has power and they will do best to make sure board and majority share holders are happy (meaning more luxury spending for them). What’s your view, Prof? What can we do? Go on ‘Occupy’, or be part of the band wagon to be as corrupted as they are, and one day live in a Hillsborough house thinking that once I was on the side of the Prof?

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