Oh, the poor beleaguered American corporation. To hear GOP leaders, and even a few Democrats, tell the tale, companies in the U.S. are severely overtaxed and it’s limiting America’s competitiveness. And that’s why the GOP-controlled Congress wants to slash the corporate income tax from the current 35 percent, to just 20 percent.
At first glance, it almost sounds reasonable. Corporations in most advanced western countries do pay a lower statutory tax rate— averaging about 22-24 percent— than in the U.S. But once you account for the differences in the number of special breaks and loopholes that so riddle the U.S. tax code, the effective corporate tax rate drops sharply, to just over 18 percent according to most analyses, which puts the U.S. well down the list in terms of actual taxes paid by corporations.
This would hardly surprise anyone who has tracked who pays what in America today. Back in the socialist paradise of the Eisenhower administration, U.S. corporations paid a third of all taxes to the federal government. Today, it’s nine percent and if the GOP has its way, it will likely drop to less than five.
The proposed corporate tax cut is the biggest cost item in the GOP’s plan, and it will, by itself, wipe out almost $1.5 trillion in federal revenue over the next decade. If the cut in corporate tax rates were paired with a plan to eliminate the legions of special interest tax breaks that companies regularly deploy to trim their tax bills, that would be one thing. But that isn’t in the Republican plan. This is simply a huge tax cut for corporations at a time of record profits.
The GOP recognizes how this is going to look to the public, so they are using make-believe in order to convince voters that this isn’t what it looks like— i.e., a huge payoff to their well-heeled donor class. They are suggesting that once their tax bills are lowered, these U.S. corporations will use their extra profits to boost workers’ pay and create new jobs.
That’s absurd. We don’t have to guess where extra corporate profits will end up. We can simply use history as a guide. Since 1978, the average inflation-adjusted wage in the U.S. has grown by an anemic 10.9 percent, while the pay of corporate executives has increased by a whopping 997 percent according to the nonpartisan Economic Policy Institute. Large U.S. corporations have consolidated their power and most are making money hand over fist. And that money is going straight to the top, to executives and major shareholders, further exacerbating the already unprecedented level of income inequality in the U.S.
Far from helping average Americans, the GOP tax plan helps pay for its massive corporate give-away by closing loopholes and tax deductions for middle-class families. Depending on which version of the bill, if any, winds up on President Trump’s desk, the GOP would cut home mortgage interest deductions, state and local tax deductions, tax credits for medical expenses, family adoption, even a tax deduction for teachers who use their own money to buy their students school supplies. In other words, they’re more than happy to nickel-and-dime the middle class to pay for massive tax cuts for the very rich. Vermont Sen. Bernie Sanders was right to call it “Robin Hood in reverse.”
Republicans can’t even argue the point. Some, such as Sen. Lindsey Graham, have readily acknowledged what’s really going on here— their plutocratic donors have paid for their campaigns and they expect to be well compensated for their contributions, or the campaign funds will dry up. Republican leaders have suggested as much in hopes of scaring their members into supporting a tax plan that is very likely the most inequitable ever devised in American history.
The GOP should be ashamed at the dishonesty, inequity, and outright venality represented by their plan. This is American governance at its very worst.