Monday, August 18, 2008

Corporate taxation blues

This New York Times editorial is trying to formulate some kind of response to the recent report from the Government Accountability Office that two thirds of corporations manage to evade corporate taxes altogether, as do 25% of "large corporations" ($50m sales, $250m assets). It's hard to know how much revenue exactly the US is missing out on through the various loopholes and evasions. However, as this Economic Policy Institute "snapshot" shows, corporate tax revenues, which used to account for 1 in 4 tax dollars collected, are now closer to 1 in 10.

This is to be coupled with the paradoxical fact that US corporate tax rates are pretty high -- 35 percent. Like healthcare, we seem to be asking for more but delivering comparatively little. Of course, what the NYT calls a "free ride," and what the World Socialist Web Site calls "no means of redistributing social wealth from the corporate oligarchic to the majority," the WSJ op-ed page decries as "uncompetitive." (It's probably the case that all are true, according to each side's standards.) The WSJ does interestingly note that Ireland manages to bring in more of a percentage of its GDP in corporate taxes (3.4%) than does the US (2.5%). That example of potential effectiveness is probably why they say that "abolishing the U.S. corporate income tax should be on the table." I have looked into it and cannot get a good idea of why this state of affairs -- high taxation but low revenues -- has come about. Does anyone know?

My favorite bit, though, was this figure from the original NYT news article:
Joshua Barro, a staff economist at the Tax Foundation, a conservative research group, said that the largest corporations represented only 1 percent of the total number of corporations but more than 90 percent of all corporate assets.
As John McCain says, choice and competition are the key to success in modern America!


Blogger curry king said...

Nice question and I was actually wondering the same thing a while back, as it's a favorite GOP talking point.

The disparity has to do with a lot of tax loopholes. So...when you hear these campaign commercials about X Republican voting for $Y in tax breaks for oil companies, those breaks account for some of the lost revenue.

The GAO hit on this recently as well:

About two-thirds of corporations operating in the United States did not pay taxes annually from 1998 to 2005, according to a new report scheduled to be made public today from the U.S. Government Accountability Office.

Also, offshore tax shelters help decrease revenue as well.

Now, for the political hit here. McCain will lower the corporate tax rate to 25 percent, and will preserve the tax loopholes, shelters, etc. So you can imagine how much less revenue we'll be taking in from corporations.

7:32 PM  

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