Our Citizens and Corporations Pay Much Less Than They Once Did and Much Less Than in Most Other Countries
Taxes for the wealthy, and multi-billionaires like Warren Buffett, the Chairman and founder of Berkshire Hathaway, have plunged in recent years.
During negotiations regarding raising the nation’s debt limit, congressional Republicans have defended tax loopholes for corporations, claiming that America has a high corporate tax rate that is stifling economic growth and job creation. But the Center for Tax Justice (CTJ) has crunched the most recent data from the Organization for Economic Cooperation and Development (OECD), the Office of Management and Budget, and the Census Bureau, and finds that
“The U.S. is already one of the least taxed countries for corporations in the developed world.”
As a share of GDP, the U.S. had the second lowest tax rate, behind only Iceland. This statistic flips on its head the often-repeated Republican charge that America has the second highest corporate tax rate in the world. Wrong. In 2009, U.S. corporate taxes had fallen to only 1.3 percent of GDP, from 4 percent in 1965.
Conservatives love to point out that other OECD countries have lowered their corporate tax rates in recent years, but they conveniently ignore that “these countries have also closed corporate tax loopholes while the U.S. has expanded them.” As CAP Director for Tax and Budget Policy Michael Linden has noted, the U.S. is actually a very low-tax country across the board.
Senate Minority Leader Mitch McConnel (R-KY) said.
“We don’t have this problem (federal deficit) because we tax too little. We have it because we spent too much.”
It’s a popular conservative argument, but the facts overwhelmingly show this simply isn’t true. Deficits are the product of a mismatch between spending and revenue.
Low tax collections are not only a federal problem, but over 40 States are experiencing record budget deficits due to low tax collections for the same reasons. The main reasons for these low tax collections at both the federal and state level are as follows:
- High unemployment rates (See my blog post dated July 10, 2011 titled "The Root Causes Behind Today's High Unemployment Situation, And Why This May Not Change Anytime Soon").
- Decline in housing prices and accompaying real estate property tax collections (See "Change In Change in U.S. Housing Prices: 2000-2010") due to the subprime loan real estate bubble. Also see "The Housing Crisis and Construction Industry" section of my July 10, 2011 blog post.
- Decline in consumer consumption (See "Gauging The Impact of the Great Recession").
Here are 10 charts that prove just how low federal taxes are in the United States.
One June 5, 2011, Fox News conservative commentator Bill Kristol criticized the Republican Party for pretending that lowering the corporate tax rate is a cure-all for America’s economic woes. On Fox News Sunday, he interrupted a panelist who again tried to assert the U.S. is suffering from a high corporate tax rate by saying:
“Republicans are making a mistake if they focus on big businesses and corporate tax rates. Corporations have a ton of cash. The corporate tax rate is not killing big business in America.”
And, for once I completely agree with Mr. Kristol. Corporate America is doing pretty damn well. Here are a few statistics to prove my point:
- At the end of September 2010, Treasury Secretary Timothy Geitner, reported that corporate America held $1.93 trillion in cash.
- For the quarter ending March 31, 2011, U.S. companies generated record high profits of $1.7 trillion by not not hiring many full-time workers, increasing production from existing workers, and relying on temps and contract workers. This was 1.3% higher than the 4th quarter 2010.
- For the year ending December 31, 2010, the Fortune 500 generated nearly $10.8 trillion in total revenues, an increase of 10.5% over 2009, while increasing total profits by 81%.
- For the year ending December 31, 2010, median CEO pay jumped 27% while the pay for workers in private industry, saw their compensation grow just 2.1%, says the Bureau of Labor Statistics.
The GOP presidential candidates have almost uniformly introduced proposals to radically lower the U.S. corporate tax rate. For instance, former Minnesota Gov. Tim Pawlenty (R-MN) wants to reduce the corporate tax rate to 15 percent and eliminate all taxes on capital gains, dividends, interest income and inheritance.
In conclusion, U.S. corporations have never had it so good, and after taking into account tax loop holes and shifting divisions overseas, they are really paying some of the lowest taxes in the world. Conservatives claim corporations should be taxed less because they are "job creators", but in reality they are really "job destroyers", and here's why:
- Outsourcing production overseas.
- Operating with less workers.
- Hiring less full-time workers.
- Relying on temporary and part-time workers (See my blog post of April 8, 2011). The latter trend has coined the term "Just-In-Time Disposable Workforce".
If you carefully review my blog post of July 10, 2011, you will clearly see the results of Corporate America's deliberate job destroying practices and how those practices have padded their corporate coffers and kept unemployment rates chronically high.
In a blog post dated July 20, 2011, I brought to your attention the huge problem of U.S. citizens maintaining illegal foreign bank accounts in order to avoid paying taxes on foreign investments, and the ongoing investigation by the IRS of several major Swiss banks reports who knowingly assisted U.S. citizens in maintaing their accounts at their banks. According to the IRS, illegal foreign bank accounts by U.S. citizens represent an estimated $300 billion in uncollected income taxes.
Today President OBama signed the bill raising the federal debt ceiling and reducing federal spending by $1 trillion over ten years, and reducing federal expenses an additional $1.5 trillion pending the recommendations of a bipartisan committee as to what needs to be cut (probably entitlement programs like social security and medicare). Let me just say this:
"Cutting expenses instead of raising taxes was the biggest mistake the U.S. Congress and the President have have ever made."
The wealthiest Americans and Corporate America will continue to grow richer, widening the gap between the rich and poor, and forcing millions more Americans into the ranks of the unemployed and increasing poverty rates to unprecedented heights.
I keep hearing that entitlement programs like social security and medicare, arguably the two most successful social programs in American history, are paying out more than is coming in, and that we must cut social security benefits or the entire system will collapse. Just in case you didn't know.
"There is nothing wrong with social security."
Here's the truth about social security.
"Working Americans have paid so much in Social Security payroll taxes during the past three decades that they have built up a $2.6 trillion surplus in the account. That money should make the system strong enough to cover the current level of benefits for the next 26 years or through 2037."
But Congress decided to “borrow” the surplus instead of investing.
They’ve been using it to help pay for things that have nothing to do with Social Security, things the political establishment and tax-averse Americans wanted but didn’t want to pay for: two wars, education, highway repairs and so on. And, without giving any thought to paying the surplus money back, the federal government has been trading it for special Treasury bonds that politicians used to assure us were safe in a lockbox.
Now our politicians are saying they must cut social security benefits, end it or privatize it. Wall Street would love the latter, but that's not the solution is it? Here's what really neds to be done:
"The federal government must restore social social security account back to a surplus, not destroy it."
No wonder senior citizens and retirees are pissed off.
All of this will eventually come back to haunt us, because as consumption continues to decline (see above), the American economy will simply be unable to consume the total goods and services it produces and imports, creating an unchanging spiral of new cost-cutting, higher unemployment and poverty, until the U.S. economy finally collapses into a smolding heap.
If as predicted by many economists, S&P and Moody's reduce America's bond rating from AAA to AAA or something even lower the following bad things will happen:
- Interest rates will rise, business lending will decline and businesses will be unable to hire and could even go out of business.
- A halt to any further economy recovery.
- The U.S. economy could spin into another recession.
- Foreign governments will loose faith in America's ability to pay its debts.
- The value of the US dollar could collapse.
- The US dollar could be replaced by another currency as the reserve currency of the world.
- Our standard of living will crumble.
All of these will only worsen the economic debacle we are in and result in the inevitable: An eventual economic calamity, total collapse of our economic system and end to Capitalism as we know it.
Courtesy of an article dated June 10, 2011 appearing in Center For American Progress
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