By Dave Johnson
Fellow, Campaign for America's Future
There is a big push going on to again reduce tax rates for the giant multinational corporations. See if you can guess who will make up the difference? (Hint: it will be you paying through cuts, and smaller companies that are trying to challenge the incumbency of the giant multinationals.)
Recently in the post Beware the New Corporate Tax-Cut Scam: LIFT Is A Big LIE, I warned about the LIFT coalition of large corporations trying to get rid of taxes on profits made outside the country. Of course this would result in giant companies moving jobs, factories and profit centers out of the country.
The executives who run the giant multinationals want to be let off the hook for paying taxes on profits they make outside our borders. As an Apple executive said to The New York Times, giant multinationals “don’t have an obligation to solve America’s problems.” And to prove it, American corporations are holding $1.7 trillion in profits outside the country – just sitting there – rather than bringing that money home, paying the taxes due and then paying it out to shareholders or using it to “create jobs” with new factories, research facilities and equipment.
Laura Tyson Argues For Corporate Tax Cuts
LIFT is mostly about profits the giant multinationals make outside of the country. There is also the RATE coalition, another group of giant companies working to get corporate taxes cut here, too. To that end, Laura Tyson has a syndicated opinion piece out, Why Give Corporations A Tax Break? in which she argues a “pro-growth rationale” for giving the giant multinationals a tax break to make them “more competitive.”
After its 1986 tax overhaul, the United States had one of the lowest corporate tax rates among OECD countries. Since then, these countries have been slashing their rates in order to attract foreign direct investment and discourage their own companies from shifting operations and profits to low-tax foreign locations. In the most recent and audacious move, the British government has embarked on a three-year plan to reduce its corporate tax rate from 28% to 20% – one of the lowest in the OECD – by 2015.
The US now has the highest corporate tax rate of these countries. Even after incorporating various deductions, credits, and other tax-reducing provisions, the effective average and marginal corporate tax rates in the US – what corporations actually pay – are higher than the OECD average.
Cutting the rate to a more competitive level would encourage more domestic investment by US corporations, and would also make the US more attractive to foreign investors.
In the op-ed Tyson argues that we cut corporate taxes in 1986 to be “more competitive,” but since then other countries have been slashing their corporate tax rates, which makes our giant multinational corporations “less competitive,” so we should slash our corporate tax rates again to be “more competitive.”
Tyson’s argument, summed up:
1. In the 1986 tax overhaul we cut corporate taxes a lot.
2. But then other countries cut their corporate tax rates “in order to attract foreign direct investment and discourage their own companies from shifting operations and profits to low-tax foreign locations.”
3. So we are now above the average.
4. Therefore we need to cut corporate taxes even more to be more “competitive” and “attract investment.”
5. Go to step 2 until corporate taxes worldwide are zero, then giant corporations start threatening to leave the country unless the country gives THEM money. (Tyson leaves out this obvious next step.) (more…)