You've no doubt heard other iterations of a story
appearing in Wednesday's
Washington Post. Corporations, though still whining about their "heavy" tax burden, are paying less in taxes as a percentage of total revenue and making more in profits as a percentage of gross domestic product. Check out the 30 companies listed on the Dow Jones industrial average, for instance:
A Washington Post analysis of data from S&P Capital IQ, a research firm, found that in the late 1960s and early 1970s, companies listed on the current Dow 30 routinely cited U.S. federal tax expenses that were 25 to 50 percent of their worldwide profits. Now, most are reporting less than half that share.
The reason is not simply a few loopholes tucked deep in the tax code. It’s far bigger: the slow but steady transformation of the American multinational after years of globalization. Companies now have an unprecedented ability to move their capital around the world, and the corporate tax code has not kept up with the changes.
Just the opposite, in fact. Experts say the U.S. code has encouraged companies to shift their income overseas, where it is more lightly taxed by the U.S. government.
The
Post goes on to cite some of the complainers, and points out that companies have found means to shift their income "roving from country to country in search of the lowest tax burden." The biggest portion of the dive in taxable corporate income in the United States is derived from accounting tricks, not actually moving operations overseas, but finding tax havens. Not illegal. Tax law simply has not kept up. Read why below the fold.
One problem is that it's difficult to figure out exactly what companies do pay in taxes in the U.S. After doing its analysis, the Post contacted all 30 companies on the DJIA to ask what they actually paid in taxes every year. Not a single company provided that information.
The Business Roundtable argues that the U.S. corporate rate is the highest among developed nations. But that's not really the case. The statutory rate of 35 percent is high, but the effective rate, what actually gets collected, is quite low comparatively. In fact, the effective rate fell to a 40-year low in fiscal 2011 of just 12.1 percent. As the charts below show, the United States not only taxes corporations less than other nations, it also raises less revenue from corporate taxes.
While there is a battle going on among multinational companies to keep their profits up by finding the countries with the lowest tax rate, tax reformers in the United States have been arguing for a lower statutory rate with loopholes closed. But, past experience shows, when some loopholes are closed, others get opened. Republican Rep. Dave Camp of Michigan, chairman of the House Ways and Means Committee wants that rate set at 25 percent, although a few others have argued for lower, including zero. In addition to lowering the statutory rate, he would like to lower the tax rate for repatriated overseas earnings (much of it "overseas" via those accounting tricks) to just five percent.
Globalization makes finding a means of reasonable taxation that is not squelched by tax-rate shopping difficult indeed. As the plutocrats become, individually and corporately, ever more mobile, they can be expected to crank up their search for a better deal while maintaining the high pitch of their whining about being overtaxed. They do this with a straight face even as their profits hit new records. It's all part of the class war that has returned us to 1920s levels of income and wealth inequality, the lowest tax burden on the upper tiers since pre-New Deal era. The continuing cries from those with the most for more, more, more seems now permanently connected to demands that government provide less, less, less services to those who need them most.
