Large Corporations: The True Welfare Queens

As the Biden administration's infrastructure plan is debated, Republicans continue their obstruction and adamantly oppose any increase in the corporate tax rate even as data shows  that corporations pay a pathetic percentage of federal tax revenues, with some corporations paying no taxes despite billions in revenue each year.  Meanwhile, the working class and middle class pay far more in taxes even as they struggle to survive financially. The hypocrisy of Republicans' sudden concerns about deficits is underscored by their defense of the 2017 $1.5+ trillion in tax give away to the super rich and corporations and their silence as Donald Trump drastically increased the federal deficit. One can only hope that Democrats get their messaging right and educate the public on the reality that it is not welfare queens that Reagan bloviated about but instead large corporations that are the true freeloaders in America in 2021. A piece in the Washington Post looks at the damning reality of how little corporate America pays to support the nation.  Here are excerpts:

Republicans are in a brutal political position right now. They’re struggling to find an attack on President Biden’s jobs plan that will land, and their leading option — that raising taxes will kill jobs — is forcing them to defend their hideously unpopular 2017 corporate tax cuts, which Democrats want to partially undo.

A new data presentation from Sen. Ron Wyden (D-Ore.) should make this even worse for Republicans. It vividly illustrates why the status quo on corporate taxation is so hard to defend: It shows how little we collect in corporate tax revenues as a percentage of the economy, how bad the future outlook is and how miserably this compares to other countries.

Right now, Politico reports, Republican senators are developing a game plan for the coming battle. A handful are working on an alternate infrastructure plan, which would spend far less than Biden’s and appears designed to entice Democrats into bipartisan negotiations.

NBC reports that even the few Republicans inclined to support such a thing can’t agree on the size of a smaller expenditure. What’s more, the rub is how this would be paid for.

Republicans adamantly oppose raising corporate tax rates to fund even this smaller bill, and instead want to rely on something like raising the gas tax, which Democrats oppose, because it’s regressive, whereas corporate tax hikes are progressive.

This is making Democrats wary that Republicans are laying a trap, Politico reports:

Some Democrats privately argue that they shouldn’t allow Republicans to throw their weight behind a popular infrastructure bill without requiring their engagement on the more divisive debate over how to pay for it. 

That’s not something Democrats should let Republicans get away with. Which is where Wyden’s new presentation comes in.

The data from Wyden, the chairman of the Senate Finance Committee, places the corporate tax status quo in a larger context. This status quo, importantly, was created in part by the 2017 GOP tax cut, so it shows what Republicans want to maintain, and what Democrats want to change.

Relying on information from the Congressional Budget Office, Wyden’s staff calculates the following:

• From 2000 to 2016, corporate tax receipts averaged around 1.7 percent of total gross domestic product (which Wyden’s office calls the “modern average”).
• Immediately after GOP passage of the 2017 tax bill, corporate tax revenues as a percentage of GDP dropped nearly 40 percent below that modern average.
• In 2018, the first year after the GOP tax cuts passed, the United States was last in corporate tax revenues as a share of GDP of all countries in the Organization for Economic Cooperation and Development.

That’s a striking indictment of the status quo, notes Steve Rosenthal, a senior fellow at the nonpartisan Tax Policy Center, who says his own calculations roughly confirm Wyden’s.

“In 2017, Republicans slashed corporate tax rates, which decimated corporate tax receipts,” Rosenthal told me. “U.S. corporations avail themselves of the benefits of the U.S. economy — infrastructure, workforce and the like — but contribute very little to it.”

“Republicans’ red line on corporate revenue is completely unreasonable," Wyden told us in a statement. “Corporations have never contributed less to federal revenues than they do now — thanks to Republicans’ tax giveaway.”

What’s more, the Biden plan wouldn’t just raise corporate tax rates. Such a hike would likely fall to some extent on corporate profits generated by market power, or monopoly rents. Democrats would also try to close loopholes that enable multinational corporations to reduce tax bills with international profit-shifting trickery.

Shouldn’t the new working-class GOP we keep hearing about, particularly those Republicans who preen around on Fox News as populist scourges of woke, elite, globalist corporate domination, support such measures?

As it is, polls show that raising corporate tax rates has broad public support, both generally and in its specifics. If Democrats can press this case about the indefensibility of the status quo, the Republican position should get even harder to sustain.