Corporate tax rate isn’t as high as it seems
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Bob Moon: We’ve been keeping you updated on proposals to reform the nation’s tax code, ideas from the co-directors of the president’s debt commission. But we’ve yet to check out the corporate tax proposals.
Republican Alan Simpson and Democrat Erskine Bowles recommend reducing the nation’s corporate tax rate, from 35 to 26 percent. Company executives frequently complain the current tax rate is the highest in the world. Is it really?
Marketplace’s John Dimsdale takes a look.
John Dimsdale: Among the industrialized countries, only Japan’s corporate tax rate is higher than the U.S. But Bob McIntyre with Citizens for Tax Justice says U.S. corporations can reduce that hit by close to a third, thanks to a long list of tax breaks.
Bob McIntyre: When you add in all the loopholes that we have that the other countries don’t have, we’re down near the bottom of corporate taxes as a share of GDP. Only three countries in the industrialized world are lower than we are.
Those deductions include depreciation on equipment, tax breaks for investments in research and development, and companies don’t pay taxes on the appreciation of inventory sitting on factory shelves. The proposal from the directors of the presidential deficit commission would lower the corporate tax rate by nearly 30 percent in return for doing away with most corporate tax deductions. But McIntyre says that doesn’t raise any more tax revenue from corporations.
McIntyre: This is supposed to be the deficit reduction commission. If they close all the corporate loopholes and then give all the money back to the corporations, they haven’t done nothing about the deficit.
But beyond the loopholes, some companies avoid paying the tax rate in other ways. For example, this month Bloomberg reported how Google sliced its tax rate to around 22 percent last year. They did it through legal accounting maneuvers to transfer most foreign income to Bermuda, where there is no corporate income tax.
So some experts say that U.S. corporations have done all right. Others say that they’re just leveling the playing field with other countries that have lower corporate tax rates.
In Washington, I’m John Dimsdale for Marketplace.
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