Home > Uncategorized > Making corporate taxes great again

Making corporate taxes great again

from David Ruccio

fredgraph (1)

I continue to maintain that Congressional Republicans will stick with President Donald Trump until they get their favorite policies enacted—or until Trump’s missteps and declining popularity stand in the way of their getting what they want.

And one of the things they want is tax reform—specifically, a cut in corporate taxes.

Here’s the problem: U.S. corporations aren’t taxed too heavily. They’re taxed too little.

As is clear from the chart above, corporate profits (as a percentage of GDP) have risen dramatically since the mid-1980s—from 5.8 percent in 1985 to 11.8 percent in 2016. 

federal1

However, as I have shown before, even while individual taxes have remained relatively high (as a percentage of federal tax receipts), taxes on corporate income fell throughout the postwar period and have remained relatively low (at about 10 percent federal tax receipts) since the mid-1980s.

Here’s what the Economic Policy Institute recommends in a recent report:

If we wish to reform corporate tax policy to benefit the vast majority of Americans—and not just a wealthy few—we should not be talking about lowering corporate tax rates or offering other tax breaks to corporations; we should instead be focusing on closing loopholes in the system that have eroded the corporate income tax base, to ensure the corporate sector is paying its appropriate share of taxes.

  1. May 24, 2017 at 5:29 pm

    Thanks! Closing the loopholes is definitely the way to close off the race to the bottom.

    Gabriel Zucman’s new book ‘The Hidden Wealth of Nations: The Scourge of Tax Havens” spells out for the first time a workable strategy to close down the offshore tax havens, combining financial transparency rules with punitive export tariffs on non-compliant nations, such as Switzerland. http://gabriel-zucman.eu/hidden-wealth/

  2. May 24, 2017 at 5:56 pm

    A new book by T R Reid (smart journalist) called a ‘fine mess’ makes many same points as EPI, but he advocates a VAT. It actually may be a better idea. (Though none of these are going anywhere soon–too much beurocracy). Also, noone really agrees with each other–everyone seems to have a magic bullet based on a limited analyses.
    The best thing to me might be some boycott to the extent possible. AS LBJ said ‘we could have socialism tomorrow if we had to votes’ (and i’m not a socialist, except maybe the libertory socialist version). The world changes so fast and has so many ‘goodies’ people won’t boycott. (EPI and other groups like CEPR still have a ‘pro-growth agenda’. –more is better. But they mostly define more in usual terms—more stuff. I’d rather see more coherent and scientific thought.

  3. May 24, 2017 at 6:05 pm

    p.s. T R Reid makes a good point that actually cutting corporate tax rates would lead to unemployment — basically amongst the set of high paid tax attorneys who help do tax evasion. Also, all the people they employ—the private schools, gardeners, uber cabs, private universities, foreign resorts. He still think its a good idea—get rid of all the loopholes, cut the tax rates, make the effective rate the same as the statutory rate, and give poor people a rebate to cover their increased VAT costs.

  4. May 24, 2017 at 8:35 pm

    We have an income tax in my state. Here’s a trend, roughly: between the early 70s and now the income tax burden on personal versus corporate has more than reversed. It used to be 60% corporate and 40% personal. Similar shift in property tax burden. When I last checked this 15 years or so ago, the data came from a statewide think tank study that has escaped my grasp. Several factors for the income tax shift, especially the loopholes. For the property tax shift the cause is especially my state’s stupid jarvis-inspired tax limitation passed in the 90s.
    Whatever reform is proposed needs always to state the elephant in the room: predatory corporate unaccountable capitalism.

  5. rddulin
    May 24, 2017 at 8:36 pm

    What we need is a bank transaction tax, and abolish all other taxes.
    No property tax.
    No sales tax.
    No payroll tax.
    Absolutely fair.
    Easy to collect. Lowest bureaucracy necessary.
    Very hard to avoid. Not worth avoiding.
    No invasion of privacy.
    No hounding people for money.
    Gets rid of all financial market scams.
    Largest tax base.
    Lowest tax rate for necessary revenue.
    No loopholes.
    Fairly taxes internet business.

    Some disadvantages in disbursement being subject to political manipulation would have to be addressed.
    One link.
    http://www.india.com/business/banking-transaction-tax-what-is-btt-its-advantages-and-disadvantages-for-indian-economy-1648494/

  6. May 25, 2017 at 1:11 pm

    There some basics we need to consider before launching a rebuilding of the US taxing structure. First, most versions of conservatism don’t want either government that works or a fair and productive taxing structure. Most want no government apart from what they choose to put in place. Also, most want to pay no taxes. Let the “suckers” pay taxes. Conservatives will happily take revenue from tax collections but have no interest in contributing to those tax collections. Second, most conservatives want everyone to “pull themselves up by their bootstraps.” Except, of course themselves. They are obviously chosen to lead, to be the protectors of liberty and freedom, and to be blessed with wealth. Third, conservatives want free markets and they use government to set them up, monitor them, and pick winners and losers. In the US progressive era of the turn of the century this was called corruption. No more. Now it’s “free” markets and liberty. And, since its already available, conservatives also use government as the scapegoat when these “free” markets go off the rails. Finally, conservatives put up two straw persons to fake out the public and keep conversation away from their own actions. You know the old huckster’s trick. Watch this hand while I rob you with the other. One is deficits, deficits, deficits. Conservatives, except for a few eccentric economists don’t really understand or care about deficits, of any sort. But the talk about them scares the hell out of “John Q. Public.” The second is “taxes are too high.” Especially for that same “John Q. Public.” These scams have worked most of the time since the 1950s. These need to be gotten rid of if there is to be any chance of an honest, useful, and fair tax structure for the US.

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