What Effective Tax Rate Do American Corporations Pay and How Does it Compare to the Other Major Developed Economies of the World?

Procon.Org writes that few U.S. business ever pay the full corporate income tax rate due to exemptions, preferences, deductions and other benefits.

The right measure of corporate taxes is the effective corporate tax rate, and there the United States is roughly on the same level as the average of the six other large developed economies (Canada, France, Germany, Italy, Japan and the UK), at about 30%. America has no tax-based competitive disadvantage against such countries.

Procon.Org writes in fact that the larger the corporations are, the less effective corporate taxes that they actually tend to pay, noting:

"Of the 500 large cap companies (a market capitalization value of more than $10 billion) in the Standard & Poor (S&P) stock index, 115 paid a total corporate tax rate – federal and state combined – of less than 20% from 2006-2011, and 39 of those companies paid a rate of less than 10%."

All this talk about reducing corporate taxation and thereby stimulating employment and the economy is just mostly nonsense.

The USA does of course have a problem when competing with slave-labor-like nations, and the solution there is to forbid the outsourcing of manufacture to such nations or the import of products made under slave-labor-like conditions.

Make mass foreign labor exploiters such as the Apple firm produce their wares in the USA and/or forbid the sale of their slave-labor-like produced products domestically. It is an easy legislative solution.

Reducing America to a slave-labor-like nation by increasing the already massive national inequality of income and wealth by pandering tax-legislatively to the benefit of the corporate exploiters is not the right solution by any means.

About that Yarn That Reducing Corporate Income Taxes Decreases Unemployment and Spurs the Economy

Many erroneous ideas are at the root of prevailing evidence-unsubstantiated political and economic memes in Washington D.C.

Concerning the issue of more or less corporate taxation, the hordes of uninformed people in the U.S. Congress might consider examining the following:

• A graph of the comparison of the U.S. corporate tax rate and the unemployment rate from 1950 to 2010:
  
  SEE at procon.org (Pros and Cons  of Controversial Issues): Unemployment rate vs. Corporate Tax as % of GDPCorporate tax revenue as a percentage of GDP, 1950-2010, Source: Michael Diedrich, "Graph of the Day: Jobs and Taxes," mn2020hindsight.org, Oct. 20, 2011,
  showing clearly that the one has nothing to do with the other.


• William Lazonick, Profits Without Prosperity, Harvard Business Review, September 2014, which indicates that increased money in corporate hands goes straight into the pockets of already over-compensated executives.


• Generally, TaxProfBlog and Paul Caron at Northwestern Symposium: 100 Years Under the Income Tax, e.g. Adam H. Rosenzweig , A Corporate Tax for the Next One Hundred Years: A Proposal for a Dynamic, Self-Adjusting Tax Rate, Northwestern University Law Review, Vol.  108,  No.  3 (2014), which points to many of the problems involved in thinking that "corporations" PAY income taxes. In fact, SOMEBODY else foots the bill, i.e. stockholders, wage-earners, consumers. Corporations are simply legal fictions and themselves pay nothing -- it is people who pay. The right question is -- which people are pocketing and which people are paying?


• Corporate Profits of Low-Wage Employers, National Employment Law Project, showing that low-wage employees, who mostly work for large corporations, see no share of increased corporate monies.


• U.S. Unemployment Rate 1947-2014, and read Does Lowering the Federal Corporate Income Tax Rate Create Jobs?, at ProCon.org. (Pros and Cons  of Controversial Issues)

Also in Law, The Rich Get Rich and the Poor Get Poorer as Law Schools Continue to Churn Out Too Many Too Highly Indebted Graduates

At the New Yorker, Jeffrey Toobin has the story in Law Schools and the Legal One Per Cent.

The solution (tongue-in-cheek here of course) is to adopt the same awesome logic we now find being bantered about by those caught in the thrill of the Republican win of the majority in the U.S. Senate, whose first "cause" seems to be to reduce corporate taxes, thus allegedly opening the floodgates of employment.

Analogously, what one needs to do then is to reduce the taxes of corporate law partners around the country, and the number of new hires of law graduates will arguably increase astronomically via the increased "in pocket" partner income....

or in the case of corporations, the equally gullible view that outsourced, expatriated and off-shored companies such as Apple and Google and similar, who, we have read online, pay only about 2% corporate income tax in the USA, will thus suddenly be induced to repatriate onto American shores by the reduction in the corporate tax rate from let us say the current 35% (which few pay) to 25%. It is not going to happen.

Such is the empty, vapid intelligence that guides the many economically confused heads that are being elected to U.S. Congress, and their uninformed supporters.

See our next posting.