The GOP says that we as a nation have too high of an income tax structure for the corporations. This has a drag on the economy because after they have paid their income tax there is no money left for the expansion of the economy. The refer to the low unemployment rate and the lack of spending when it comes to plant and equipment. Their argument sounds logical. If you have spent your cash on taxes how can you hire employees and spend money on fixed assets.
However when you look inside the tax that the corporations are paying the numbers do not reflect this theory. Yes the United States has the highest tax rate out of all the countries in the world. Thirty nine percent is the highest. However when you compare what the corporations are actually paying to other metrics that argument loses merit. For example, according to an article from CNN money published in July 1, 2013 by James O’Toole, the U.S. corporations tax collection totalled 2.6% of GDP in 2011. That was the 11th lowest in a ranking of the 27 wealthiest nations. Of the 2.2 trillion dollars that are received by the U.S. Treasury each year in income tax, only 11% of the tax revenue comes from U.S. corporations. Individuals pay over 50%. That ratio has to be more balanced. When proponents to lower corporate income tax say that the corporate income tax is too high, my response is No. Personal income tax is too high and corporations are not paying their fair share of the income tax. That is what the statistics show.
In other terms it is not where you start, it is where you finish. In 2014, U.S. corporations are lobbying the U.S. Congress because they have accumulated billions of dollars in over sea banks and do not want to repatriate the money because they do not want to pay tax on that cash. What they are doing is borrowing money at historical low rates to help them fund their operations.
The bottom line to this situation is that the corporate tax rate could be at 100% and the corporation would find loopholes to crawl into and find a way to pay a small or even zero tax. Many people are saying that the corporations should be allowed to bring their cash into the United States and pay a lower percentage rate than what is currently tax law. As a result, they say that would help grow the economy. What they fail to realize that the corporations would have won again at the cost of the individual tax payer. Like they say, “two wrongs do not make a right”.
What needs to be done is a comprehensive change in the system. California taxes corporations on the gross income of the corporation. They do not care if the corporation had net income or not. They just look at the top line (revenue) and hit you with tax. The higher the revenue the greater the tax. That should be looked at by the federal government. Same thing with off shore U.S. corporations you have revenue from other countries. Pay tax. This would stop many corporations from leaving the United States. That really would people back to work and spur the economy. It is time for the U.S. government to put the hammer down on these schemes that corporations have done for many years.