Cutting corporate taxes won’t bring the economic change America needs. The best way to keep America competitive in the global economy is to invest in America’s workers and infrastructure by strengthening schools and job training programs, and harnessing the power of renewable resources to lower energy costs. If taxes determined where corporations do business, America’s economy would be weaker than the economy of the Pacific island nation of Vanuatu, which has the world’s lowest corporate tax rate. But we aren’t being outcompeted by countries like Vanuatu because American workers are among the best in the world—and investing in them is how America will continue to prosper.
Strengthening our economy isn’t just a question of cutting taxes—it’s whose taxes get cut that matters. When families’ taxes are cut, they use the extra money to buy necessities, send their children to college, and save for retirement. Many corporations spend tax savings on multimillion-dollar executive bonuses, which doesn’t help our economy grow.
Cutting corporate taxes further means workers will have to pay. Conservatives have been shifting the tax burden from corporations to individual workers for years. Lowering corporate taxes even more means that the government will either have to raise taxes on working families, or cut spending on services like Social Security.
We need a tax code and business investment strategies that reflect America’s priorities and values. Corporations should be rewarded with tax breaks for creating jobs, not for finding offshore tax loopholes. Our tax code should encourage companies to invest in America’s workers and communities. To help companies manage the costs of doing business and pass savings on to consumers, we need to invest in clean energy technologies that will help keep energy bills low.
The problem is not that corporations are overtaxed. In fact, a whopping two-thirds of American corporations and foreign corporations doing business in the United States pay absolutely no federal income taxes—despite taking in $2.5 trillion in sales. [Government Accounting Office] In 2005, 28 percent of large foreign companies doing business in the United States (those with more than $250 million in assets or $50 million in sales) paid no taxes.
Compared to our competitors’ corporate tax rates, the U.S. rate is low. According to the World Bank and PricewaterhouseCoopers, the United States’ total corporate tax burden ranks 76th of over 100 countries. [World Bank] When conservatives claim that the U.S. tax rate is high, they’re talking about the “statutory rate.” But corporations treat the statutory rate as just a guideline—they use offshore tax havens and accounting loopholes to pay much lower actual rates. The tax rate corporations actually pay is lower than the rates of economic competitors such as China (15th highest tax rate), India (19th), and Mexico (51st). [World Bank]
The U.S. collects less in corporate taxes than other wealthy countries do. Measuring tax collections as a share of GDP is a good way to put a country’s tax rate in the context of its economy’s size. In the last seven years, the U.S. has collected an average of 2.4 percent of its GDP in corporate taxes—less than the average 3.4 percent collected by other industrialized nations. If laws remain the same, U.S. corporate taxes will be only 1.9 percent of GDP in less than ten years. [U.S. Treasury Department]
Corporations should pay their fair tax share. American workers increasingly carry more of the tax burden than corporations do. In the 1950s, corporate income taxes accounted for about a quarter of federal tax revenues; now they account for just one-tenth, leaving workers to pay the difference. [Economic Policy Institute]