As we can see from the chart above, the red line shows that corporations used to pay a much larger portion of total revenues — back in the mid 1940s, it was 40% of total revenue. Today it’s only 10%, and was recently as low as 6%. Measured as a percent of the total economy, corporate taxes once added up to 7% of Gross Domestic Product (GDP). Today it’s a meager 1.6% of GDP or $274 Billion. Remember, GDP is currently about $17 Trillion, so each 1% equals $170 Billion. When corporations don’t pay their fair share, the rest of us ”little people” have to make up the difference or the deficit increases.
The declining revenue share paid by corporations is certainly not because they
haven’t been profitable. On the contrary, since 2010, we’ve seen all-time highs for
corporate profits. In 2013, corporations raked in 10% of GDP in after-tax profits,
which equals about $1.7 Trillion.
But corporations only paid an average effective tax rate of 20% of their profits — well below the statutory 35% federal corporate rate (39% including state and local taxes) and far below the four decade high of 50%.
Much of this lost revenue is due to clever tax avoidance schemes in which corporations exploit loopholes that they themselves have lobbied to insert and keep in the tax code. Spare me the “We’re just taking advantage of legal strategies available to us...” canard. You and your lobbyists wrote the dang tax code!
One tax evasion gimmick corporations use is to keep profits abroad because, unlike other countries, our tax code stupidly waits to tax profits when they are brought home. There is now an estimated $1.6 to $2 Trillion in profits being stashed overseas — costing Americans $560 to $700 Billion in lost revenue.
Then the tax deserters lobby for another “repatriation tax holiday” to bring the profits back at a meager 5% tax with the false promise of creating lots and lots of jobs. Instead, they boost executive pay and shareholder dividends and buy back their own stock to inflate the share price. We already fell for that ploy in 2004. Fool me once… Rather, we should change our tax code to tax any corporate profits as they are earned in the U.S., with penalties for shifting it abroad.
Most recently, Walgreens backed down under public pressure to abandon its “inversion” (perversion!) scheme in which it planned to buy up a small Swiss company and then change its address to Switzerland to avoid paying estimated U.S. taxes of $4 Billion over the next 5 years. Of course, Walgreens would still be on every other street corner in America, using our roads and legal system, depending on our workforce and customer base, and getting 25% of its revenue from taxpayer-funded programs like Medicare and Medicaid. It just wouldn’t be paying its fair share of taxes anymore. What an ungrateful, unpatriotic taker!
While Congress drags its feet on reining in these tax dodgers, you can demand that the President sign an executive order to prevent corporations from deserting America through the inversion perversion:
http://www.dontdesertamerica.com/...