Corporate Taxes Need Reform
Congress must act, but probably won’t
Published: Saturday, March 31, 2012
Updated: Monday, November 5, 2012 20:11
What should the U.S. do about its tax rate?
Yesterday was a historic day for the U.S. Oddly enough, we didn’t even do anything to make it happen.
Japan was, for a long time, emperor of global corporate tax rates with a levy of 39.5 percent when all local, regional, and federal taxes are taken into account. The United States was a close second with 39.2 percent.
That is until yesterday, when Japan’s rate dropped to a curiously specific 38.01 percent, making us the number one developed nation for corporate taxes.
Oh wait, that’s bad.
How did we get here? Who do we blame for our obscene tax rate? According to Wyoming Senator John Barrasso, it’s President Obama or the evil Democrats’ fault. Both seem like a great targets – after all they’re for progressive tax rates so obviously they would want to have prohibitively high taxes on corporations.
Of course, unless you have the mental capacity of a 10-year-old, it’s not that simple. In fact, our corporate tax rate has been stagnant for over 20 years, through the Clinton and Bush administrations. Even when the anti-tax Republican Party had an iron hold on the federal government, the rate wasn’t changed.
Probably because even with a majority of the government under Republican control, reforming the entire corporate tax code is not an easy prospect.
Back in February, before our crowning as tax kings, Obama suggested a reform to the corporate tax structure by reducing the rate to 28 percent, but on top of that he also wanted to close the loopholes that some massive corporations like GE use to minimize their tax rates to notoriously low levels.
Republicans, not letting Obama ever get the upper hand, want a 25 percent rate in stead and want the breaks to stay in place for big companies. Of course, they don’t want it to sound that way, so they divert attention away from the fact that these loopholes cripple the tax code and instead suggest that loopholes essentially tax increases.
And that’s what the core of the debate is really about: who can win the battle for rhetorical supremacy, not who can do the best by the country. Since 2000, 30 developed countries have reduced their corporate tax rate, and now the global average is 25 percent.
Of course, liberals will point to companies like GE and suggest that they already barely pay any taxes and shouldn’t get any breaks. The current system, however, is the worst kind imaginable for responsible companies. A corporation that pays the normal rate without trying to wiggle out of paying anything is penalized while big companies that can afford to weasel out of taxes get rewarded.
We’d like to remain optimistic. It’s easy to hope that the government will do what it needs to do to get the job done, but we all know it’s unlikely.
Republicans will continue to pretend that having companies like Verizon pay higher than a 2.7 percent tax rate is an unforgiveable tax hike, and Democrats will act like every corporation is a demonic presence that will never act with morals.
It’s the core rule of the federal government right now: everything is broken from top to bottom and nobody wants to fix it; everyone just wants to look like the guy who tried to fix it.
Hopefully our prophecy doesn’t come true. One of these days the playing field may be level and fair for everyone, not a free for all.