Why corporate tax reform will be hard, in one graph

[ProSense]

Ezra Klein: Why corporate tax reform will be hard, in one graph




NYT: Corporate Tax Code Proves Hard to Change

WASHINGTON — Large trucking companies paid the government more than 30 percent of their income in 2009. Biotechnology companies paid less than 5 percent.

Such yawning gaps among industries have become a defining feature of the nation’s corporate tax code, an unwieldy accretion of rules and exceptions that amount to a reward for some kinds of businesses and a rebuke for others.

President Obama on Tuesday added his name to the long list of politicians who have called for an overhaul of those rules, so that companies of all kinds pay the federal government a roughly equal share of their annual profits.

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But recent efforts to rationalize the code all have failed, and some members of both parties express skepticism that this time will be different. The problem, in a nutshell, is that the popular step of lowering taxes for industries like trucking requires the unpopular step of raising taxes for industries like biotech.

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This needs to be fixed, permanently.

[damntexdem]

1. More often, in one graft.

Though likely more than one. ;-)

[ProSense]

2. Barack Obama in State of the Union says U.S. corporate tax rate is among world's highest

Politifact: Barack Obama in State of the Union says U.S. corporate tax rate is among world's highest

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We found that for 2010, the U.S ranked second to Japan by a fraction of a percentage point -- 39.54 percent for Japan to 39.21 percent for the U.S. But that figure is already outdated: Japan has moved to cut its rate for 2011 by 5 percentage points, leaving the U.S. with the highest corporate tax rate among OECD nations.

Still, the issue is complicated, so let’s delve a bit deeper.

The OECD rate is the "statutory" rate -- that is, the top corporate tax rate on the books. But as Obama indicated, many companies pay considerably less than that, due to deductions and other exclusions. Adjusting for these factors produces a statistic called the "effective tax rate."

The World Bank has assembled data from 183 nations and made a series of statistical adjustments to produce a full international comparison of effective tax rates. By this measurement, the U.S. rate is considerably lower than the published rate -- 27.6 percent. But in a comparative sense, that's still pretty high: Among larger international economies, only Japan, New Zealand and Thailand imposed a higher effective rate, according to the World Bank study. And Japan's number should fall by the time next year's study comes out.

The World Bank also produces another -- and broader -- statistic. This measure factors in not only the corporate profit tax but also a range of other taxes paid by businesses, including the cost of employee taxes borne by the employer. When the World Bank ranked countries from the lowest level of taxes to the highest, the U.S. ranked 124th out of 183 -- meaning corporate taxes were relatively high. A number of other large and/or democratic countries were higher, including Austria, Belgium, Brazil, China, France, Hungary, India, Italy, Spain and Sweden.

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Appallingly, the rate for more than half the industries in the OP chart is runs from 60 percent to 13 percent of the actual U.S. corporate tax rate of 35 percent.

There's absolutely no reason why businesses in this country should be paying as little as 4.5 percent in taxes.

[Name removed]

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[edsmeal]

3. I agree but how do we answer the claim that the cost is just passed down?

NT

[ProSense]

4. What cost? n/t

[golfguru]

5. Klein's article is mis-leading

the reason some industries as a group pay lower tax rates is
that half of them have NEGATIVE profits. That brings down tax rate
for the industry as a group.

Electric utilities are the most dependable profit makers, very very
seldom they record losses. I should know because over the last 30 years
I have owned 3 dozen different utility stocks.

[ProSense]

6. Klein didn't create the chart

It's from this NYT article.


"the reason some industries as a group pay lower tax rates is
that half of them have NEGATIVE profits. That brings down tax rate
for the industry as a group.

Electric utilities are the most dependable profit makers, very very
seldom they record losses. I should know because over the last 30 years
I have owned 3 dozen different utility stocks."

Right, not every company is profitable, but are you claiming, for example, that drug companies are paying lower taxes because they're not profitable?

Profits will vary in every category, but the concentration of profits is likely highest among the industries paying the lowest rates.