A Boeing aircraft painted with a Disney motif, two of the corporations involved in the "coalition" to lower corporate taxes (From Flickr -- All rights reserved by Dave H @ YVR)
Several of the largest and most profitable corporations in the United States are joining together in a bid to initiate an “overhaul” of the corporate tax code. The result of what is one of the country’s biggest corporate lobbying efforts in Washington could be drastically lower taxes for major American businesses.
The Wall Street Journal is reporting that American corporations from Boeing to the Walt Disney Co. to Verizon are prepared to form a “coalition” with the purpose of pressing lawmakers in Congress to slash the corporate tax rate while simultaneously preserving the generous tax loopholes that allow many of these corporations to pay nowhere close to the advertised rate — and which are being targeted for cuts by some lawmakers as a means to reduce the federal deficit.
This prospective coalition of American mega-corporations is counting on success by using talking points that imply that the current tax code is a “major obstacle” to “growth” and job creation.
Several major U.S. businesses are weighing a big new push for a corporate tax overhaul, hoping to seize an opportunity being created in the current debate over debt and deficits, according to people familiar with the situation.
In meetings and conversations over the last week or so, a core group of at least half a dozen big companies including Verizon Communications Inc., Boeing Co., the Walt Disney Co., Altria Group Inc. and major railroads have been exploring the idea of forming a coalition to seek sharply lower corporate tax rates. The broad aim is to improve the U.S. economy and business competitiveness. The U.S. corporate rate of 35% is among the highest in the developed world, and many tax experts believe it drives investment elsewhere. The average of other developed economies is around 25%.
A dramatic reduction in the U.S. corporate rate likely would require paring back some of the breaks that currently benefit businesses, to reduce the impact on the Treasury. Agreement on that part of the equation has been elusive.
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The discussion could raise questions for the Business Roundtable, an organization of CEOs that has been deeply involved in tax-overhaul discussions for years. Several companies that are involved in the discussions on a new coalition also are active with the BRT, including Verizon and Boeing.
The BRT released a letter Thursday to the 12 members of Congress that are tasked with coming up with fiscal fixes. The letter says that the “current tax system represents a major obstacle to both growth and deficit reduction,” and emphasizes “the necessity of reforming the U.S. tax system.”
The belief that US corporate taxes are too high, and also significantly higher than other developed nations, thus sending more business overseas, is a popular one among politicians of all stripes. Everyone from President Obama to the most strident member of the conservative Tea Party movement has expressed varying degrees of support for sharp reductions in the corporate tax rate.
Such ideology does not take into account raw data, however.
The effective US tax rate for corporations is a rather high 35 percent on paper. But the effective tax rate, the most important number in the debate and the figure tracked more closely by economists and business interests, is a much smaller 25 percent, among the lowest rates for nations with economies similar to that of the US.
The Government Accountability Office, a non-partisan arm of the US government, reported that “the average U.S. effective tax rate on the domestic income of large corporations with positive domestic income in 2004 was an estimated 25.2 percent.”
In fact, most major American corporations pay nowhere near either the 35 percent advertised rate or the effective 25 percent rate . The New York Times was one of many media outlets to detail how most corporations are able to whittle down their effective income tax rate to below even 20 percent, and at least half of all corporations pay no corporate income tax at all many years, including 55 percent in 2008.
One expert pegged US multinational corporations as “world leaders in tax avoidance.”
Topping out at 35 percent, America’s official corporate income tax rate trails that of only Japan, at 39.5 percent, which has said it plans to lower its rate. It is nearly triple Ireland’s and 10 percentage points higher than in Denmark, Austria or China. To help companies here stay competitive, many executives say, Congress should lower it.
But by taking advantage of myriad breaks and loopholes that other countries generally do not offer, United States corporations pay only slightly more on average than their counterparts in other industrial countries. And some American corporations use aggressive strategies to pay less — often far less — than their competitors abroad and at home. A Government Accountability Office study released in 2008 found that 55 percent of United States companies paid no federal income taxes during at least one year in a seven-year period it studied.
The paradox of the United States tax code — high rates with a bounty of subsidies, shelters and special breaks — has made American multinationals “world leaders in tax avoidance,” according to Edward D. Kleinbard, a professor at the University of Southern California who was head of the Congressional joint committee on taxes. This has profound implications for businesses, the economy and the federal budget.
The uproar over the corporate tax rate is part of the broader debate concerning whether American corporations and businesses are shouldering their “fair share” of sacrifice in the middle of nearly 10 percent unemployment and a struggling economy. While many point to the loopholes and tax cuts granted Corporate America as part of the reason for the nation’s high debt and lack of jobs, other lawmakers and politicians believe just the opposite; that business has been given an unfair burden and needs even greater advantages over ordinary citizens.
As part of that debate, 2012 Republican presidential candidate and former Massachusetts Gov. Mitt Romney entered the fray on Thursday while campaigning in Iowa where he was confronted with an angry voter asking whether corporations should pay more in taxes. “Corporations are people, my friend,” Romney retorted, falling in line with the most toxic of elements included in the United States Supreme Court’s dismantling of campaign finance laws, arguing limits on corporate political donations are unfair because a corporate entity is to be treated as a “person.”
Mr. Romney was speaking at the Iowa State Fair’s soapbox on Thursday morning, but when it was time for the question-and-answer session, the mood turned heated, with a small group of angry hecklers calling on Mr. Romney to support raising taxes on the wealthy to help finance social entitlement programs.
“We have to make sure that the promises we make in Social Security, Medicare and Medicaid are promises we can keep, and there are various ways of doing that,” Mr. Romney said. “One is, we can raise taxes on people.”
“Corporations!” the protesters shouted, suggesting that Mr. Romney, as president, should raise taxes on large businesses.
“Corporations are people, my friend,” Mr. Romney responded, as the hecklers shouted back, “No, they’re not!”
“Of course they are,” Mr. Romney said, chuckling slightly. “Everything corporations earn ultimately goes to people. Where do you think it goes?”
Unfortunately, corporate America could not care less about the economy. It should, of course: consumer spending drives 70% of our GDP, and employees are CONSUMERS. But they’re making out like the bandits they are, and have no short term incentive to change.
It makes my blood boil everytime I hear ‘The US has the highest corporate tax rate in the world!!1!’ Yeah – what is the effective rate? Because for many corporations it is exactly zero. Corporate taxes are only levied on those stupid enough to start their own small business and believe they can live the American Dream.
Any average American, if you made a bunch of income and stashed it away without paying taxes on it, and the government found out, they’d charge you and put a lien on everything you own until the taxes were paid… if you were unable to pay, you’d end up in prison.
Does anyone need more proof that the powers-that-be simply don’t care about the populace?
They are ONLY concerned with their corporate masters.
We are NOT a representative democracy.
This latest unconstitutional ‘super congress’ is only more evidence of that.
Tax cuts for the rich? Give me a break! The days of Ronald Reagans’ ” trickle down theory” have come & gone. Reagan was an economic disaster. The rich don’t support industry in the U.S. They go abroad to get cheap labor. If American Government had any sense they would tax the hell out of the goods & services that American companies provide. They care not for the common man;p what they do in foreign countries is comparable to slavery. The only difference is that the slavery is not in the U.S. It is in poor third world countries. But it is slavery nonetheless.