Corporate taxes

[Tigermike 3,426]

"Competitive" is a word politicians like to throw around. But their tax rate is non-competitive. It is a factor that weighs heavily on where a business may choose to locate. Or relocate. So while we maintain the highest corporate rate in the world, we see politicians mouthing off about punishing corporations that "outsource" jobs. It is a reaction to a problem government has created and now government talks about punishing those who react rationally to their tax rate? Truly amazing.

No April Fools’ joke, U.S. now world’s highest corporate taxer

Mar 31, 2011 21:41 EDT

If only it were an April Fools’ Day prank. With Japan officially cutting its corporate tax rate as of today, America now has the highest rate among advanced economies. Even its effective tax rate is way above average despite the likes of General Electric spending billions to game the labyrinthine code. A smarter approach would be to substitute a business consumption tax.

Now the United States might cling to second place if Japan cancels the rate reduction to help pay for the tsunami and earthquake devastation. After factoring in state taxes, America’s top rate of 40 percent would still exceed the average of 26 percent for the rest of the OECD.

Headline rates, of course, are like sticker prices on new cars. The real numbers are lower, thanks in part to the $40 billion companies spend annually to comply with, and often sidestep, the maximum levy. GE, for example, has taken heat for consistently paying less than what the U.S. tax code would imply it should.

But even taking into account the efforts of attorneys and lobbyists, the average effective U.S. rate in 2010 was 29 percent against 21 percent for international counterparts, according to the American Enterprise Institute. And before the recession, corporate tax revenue as a share of U.S. GDP was at its highest since the 1970s.

Politicians of all stripes have been talking about lowering corporate taxes and eliminating loopholes to pay for a sharp rate reduction. A sharply lower rate — Canada’s will be just 15 percent in January 2012 — would boost worker wages, investment, productivity, jobs and growth. Such reforms, though a big improvement, would still leave in place a flawed and unwieldy structure.

A better alternative might be a consumption tax where business would simply determine its liability by subtracting total purchases from total sales. The tax would then be imposed on what’s left, essentially a firm’s value added. Unlike the corporate income tax, a consumption tax would allow the cost of investments to be fully deducted immedi ately, providing incentives for more. Such a tax also could be imposed on imports and deducted from exports, as other nations currently do with their VATs.

The Tax Policy Center estimates an 8.5 percent consumption tax — by broadening the tax base and boosting output – would boost corporate tax collections as a percentage of GDP to 4.5 percent from the 2.4 percent the White House forecasts for the next few years. (This is the corporate tax plan, by the way, found in Rep. Paul Ryan’s “Roadmap for America’s Future.”) That’s no laughing matter.

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Like the rest of our tax structure, the corporate tax system is in bad need of reform.

It's time.

[RunInRed 16,994]

How much did GE pay last year in Corporate Tax?

[bigsixfive 336]

Who's the GE CEO buddy buddy with?

[RunInRed 16,994]

Who's the GE CEO buddy buddy with?

Who cares? I'm not much interested in the cable news blame games.

Let's start solving problems in this country: Most big corporations are shelling the system. Those "loop holes" are as good as place as any to start finding solutions that work.

[Tigermike 3,426]

How much did GE pay last year in Corporate Tax?

It's never enough for you guys on the far left is it? Tax the hell out of them and maybe they will send a few more jobs overseas. Then you can demagogue them for outsourcing.

He touched on G.E. and like I said it's time to fix the system.

Headline rates, of course, are like sticker prices on new cars. The real numbers are lower, thanks in part to the $40 billion companies spend annually to comply with, and often sidestep, the maximum levy. GE, for example, has taken heat for consistently paying less than what the U.S. tax code would imply it should.

But even taking into account the efforts of attorneys and lobbyists, the average effective U.S. rate in 2010 was 29 percent against 21 percent for international counterparts, according to the American Enterprise Institute. And before the recession, corporate tax revenue as a share of U.S. GDP was at its highest since the 1970s.

The United States is currently underperforming in global tax comparisons. The United States' top statutory tax rates will soon be the highest in the OECD, and the US effective average and effective marginal tax rates are far above the OECD average. Any effort at corporate tax reform is therefore incomplete without a push toward addressing not only the high statutory rates, but also the relatively high effective average and marginal rates. These rates are the best indicators for capital investors of their true tax liability--much more so than the statutory rates. By our calculation, the US statutory rate is nearly 10 percentage points higher than the effective average rate and nearly 17 percentage points higher than the effective marginal tax rate. Relative to other OECD countries, the United States is one of the worst performers on this score. The effective average tax rate for all OECD countries excluding the United States is 20.6 percent, while the effective marginal tax rate is 17.3 percent. The corresponding values for the United States are 29 percent and 23.6 percent. Therefore, while much media attention has been focused on the statutory rates, policymakers should address the urgent need to reform effective rates as well.

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[bigsixfive 336]

Who's the GE CEO buddy buddy with?

Who cares? I'm not much interested in the cable news blame games.

Let's start solving problems in this country: Most big corporations are shelling the system. Those "loop holes" are as good as place as any to start finding solutions that work.

I care. They're shelling the system with the help of their DC buddies. They're not doing it on their own. They're getting unfair loopholes, subsidies, and incentives that distort the playing field.

[RunInRed 16,994]

Who's the GE CEO buddy buddy with?

Who cares? I'm not much interested in the cable news blame games.

Let's start solving problems in this country: Most big corporations are shelling the system. Those "loop holes" are as good as place as any to start finding solutions that work.

I care. They're shelling the system with the help of their DC buddies. They're not doing it on their own. They're getting unfair loopholes, subsidies, and incentives that distort the playing field.

We're saying the same thing (dare I say, agreeing) - let's fix it. GM and every other corporation in this country - who benefit from educated US workers, US roads, US clean water, US drive and innovation - should pay their fair share. It's an absolute outrage that GM paid $0 last year in tax despite $5.1 Billion of profits.