GOP Lies About Excessive Corporate Tax Levels

One of the many disingenuous mantras of the Republican Party is that corporate tax rates are harming family owned small businesses.  The mantra is a lie for many reasons, not the least of which is that most family owned small businesses are operated either under limited liability companies or corporations that have filed for what's called sub-chapter S status, the result of which is that ZERO taxes are paid at the corporate level.  While the companies file a tax return - a form 1120S - it merely discloses the profit or loss for the year and how the results are allocated between the principals of the company.  As for larger corporations, the current tax code allows all kinds of loop holes and deductions.  Indeed, as Think Progress is reporting, between 2008 and 20011, twenty-six (26) large corporations paid no U.S. corporate tax despite in some cases earning billions of dollars.  It must also be noted, that what one needs to look at is the effective tax rate versus the highest marginal tax rate.  The two are entirely different things.   It's a system that Mitt Romney and the GOP seek to make even more egregious even as the middle class would be hit with higher burdens and/or decreased benefit.  Here are some highlights:

Over a four years period from 2008 to 2011, Corning Inc. was one of 26 companies that managed to avoid paying any American income taxes, even though it earned nearly $3 billion during that time. In fact, according to Citizens For Tax Justice, the company received a $4 million refund from 2008 to 2010. That didn’t stop Susan Ford, a senior executive at the company, from telling the House Ways and Means Committee this week that America’s high corporate tax rate was putting her company at a disadvantage:

American manufacturers are at a distinct disadvantage to competitors headquartered in other countries. Specifically, foreign manufacturers uniformly face a lower corporate tax rate than U.S. manufacturers, and virtually all operate under territorial systems which encourage investment both abroad and at home.

Ford told the committee that Corning paid an effective tax rate of 36 percent in 2011, but as CTJ notes, she is counting taxes on profits earned overseas that haven’t yet been paid and won’t be unless the company decides to bring the money back to the United States. Corning’s actual tax rate in 2011, according to CTJ’s analysis, was actually negative 0.2 percent.

The territorial system Ford testified in favor of would actually encourage the offshoring of profits earned by American companies, thereby reducing the amount they pay in taxes even more. And rather than helping remove a disadvantage that prevents companies from creating jobs, an economic analysis of such a tax system found that it could actually cost the United States as many as 800,000 jobs.

The United States does, indeed, have one of the highest marginal corporate tax rates in the world. In reality, however, few corporations pay it, and the nation’s effective tax rate is far lower than the rate in other developed countries.