Most of the buzz about corporate tax reform assumes that some of the loopholes and special subsidies for particular industries could be eliminated, even in this minority-obstructionist Congress, and that the savings from those tax expenditures should be used to reduce tax rates. The argument usually given is that the US needs to reduce its corporate tax rates in order to help its multinationals stay "competitive" with other countries' multinationals.
I disagree with that approach. I believe that corporations should be more heavily taxed by removing the loopholes and retaining the current rates. Generating more revenues from the corporate tax would be beneficial in several ways. It would help to reduce the annual deficit. It would help to shift the burden of the costs of the federal government to the large multinationals that have enjoyed a tax-haven tax burden while benefitting enormously from US institutions. And it would provide some squeeze on managerial pay, which has become grotesquely outsized in relation to their contribution to companies' productivity and has thus contributed to the rapidly expanding inequality in the United States.
The progressive think tank Citizens for Tax Justice agrees that corporate reform should be used to raise revenue. See the "Corporate Fact Sheet", CTJ (Sept 20, 2011). CTJ makes the following points supporting its argument that corporations are, essentially, undertaxed:
- the effective corporate tax rate is far below the statutory rate
- the US takes a smaller share of corporate income as taxes than other developed countries do
- corporate profits frequently aren't taxed at all (including for large profitable corporations)
- corporate dividends frequently aren't taxed at all because they are paid to tax-exempt recipients
- corporate dividends that are taxed are taxed at preferential rates
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