Ok, just a quickie about taxes with two more startling graphs. Another proposal that’s making the rounds in Washington is to cut the corporate income tax rate. This proposal is originally coming from the Republicans, but it looks like Obama has drunk the kool-aid too. The argument goes that corporations in the U.S. are taxed too much and that’s why corporations don’t invest in the U.S. and therefore don’t grow jobs here. The “evidence” cited is the fact that the U.S. statutory income tax rate for corporations (at least any with substantial income) is 35%, one of the two highest in the developed, industrialized world.
But it’s a deceptive piece of evidence because what matters is what corporations actually pay, not the statutory rate. As I’ve noted before, U.S. corporations, particularly multinationals pay little in income tax. GE, especially,is a welfare queen that pays no taxes despite taking huge contracts from the government. So what’s the trend been for corporate taxes as part of our GDP? The CBPP obliges with a graph:
Um, that doesn’t look to me like a severely burdensome corporate tax rate. In fact, back in the 1950’s and 1960’s, back when corporate managements were focused on making products and opening markets instead of focused on spreadsheet tricks to gimmick-up this quarter’s earnings, the corporate tax rate was higher.