Business & Economics

Three lies about the need to lower corporate taxes

Robert Reich

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

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Comments to "Three lies about the need to lower corporate taxes":
    • Rod

      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…

      [Report abuse]

    • motherfather

      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.

      [Report abuse]

    • Y LU

      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?

      [Report abuse]

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