Vox Populi: A Public Sphere for Politics and Poetry
For several decades, the Republican Party has been spewing their dogma that all corporate taxes are bad, that American corporations are horribly overtaxed, and that massive corporate tax cuts are needed to stimulate economic growth. These statements are fabrications and distortions that rely on an American public too distracted or exhausted to see the facts. Donald Trump wants to cut the top corporate tax rate to 15%, but like every one of Trump’s plans, it has no basis in reality.
The top base federal corporate tax rate is nominally 35%. However the effective American corporate tax rate is, on average, slashed to less than 15% using corporate tax loopholes and deductions that congress, dominated by Republicans for decades, has put into place. This effectively puts America’s corporate tax rate well below the global average for developed economies.
The majority of American corporations pay no federal income taxes in any given year. A GAO study found that from the years 2006 to 2012, a stunning two-thirds of all American corporations paid no federal corporate taxes after all the deductions and loopholes. Even in 2006, well before the last recession began, a full 67% of all corporations paid no federal taxes. And even among corporations with at least $10 million in assets, in 2012, 42.3% of those paid no federal income taxes.
A perfect example is the drug company Pfizer. In 2014, Pfizer reported a $3.1 billion tax bill worldwide and an effective tax rate of 25.5 percent. However, the company currently earns billions on overpriced drugs made at its foreign subsidiaries, using American patents and sold to American customers, and pays no US taxes on those profits. Pfizer’s effective tax rate to the US government is just 7.5 percent, and all of this is legal though the myriad of tax loopholes congress has passed for companies like Pfizer. Do you really think Trump’s tax “reform” is going to kill all those precious corporate loopholes?
Driven by continuous Republican demands for “tax reform”, corporate taxes have been falling for over half a century. In 1950 (when according to Republicans, life in America was perfect), corporate taxes accounted for 26.5% of total federal receipts, and American individuals i.e., the middle class, paid taxes amounting to 39.9% of total receipts, or one-and-a-half times the corporate burden. By 2015, the corporate income tax contribution had collapsed to a measly 11% of total federal income tax revenues. Today, the American the middle class and the poor are now paying a staggering 47%, or four-and-a-half times the corporate share. This is unconscionable, and yet it has happened over decades even while middle class wages have flat lined and the wealth of corporations and CEOs has exploded. The rich have gotten exponentially richer and the middle class has gotten poorer because the Republicans have systematically pillaged trillions of dollars from the American people and our national treasury. They have done this using tax cuts for corporations and the wealthy, union busting, limited-employment contracts, the massive importation of foreign workers, off-shoring, illegal non-hire agreements between companies, and the refusal to raise the federal minimum wage. The American worker has been brutalized for thirty years.
Republicans say that their tax reform will simplify the tax code, that they will eliminate the corporate loopholes, but that has never been the case. Each time the corporate tax rate has been lowered, Republicans have slowly added the corporate tax loopholes back into the tax code, so that the effective tax rate falls even further. They pursue this strategy year after year. Of course with each giant tax cut, the federal debt balloons. Ronald Reagan, touting his “trickle down economics” cut taxes by a whopping $749 billion in 1981, claiming that the resulting economic growth would generate enough new tax revenue to pay for the cuts. This thinking is ludicrous to anyone with common sense and of course, by the end of Reagan’s presidency, the federal debt had tripled. All of that magical, new tax revenue never materialized.
Under President Clinton’s leadership, the nation enjoyed a solid three years of budget surpluses, 1998, 1999 and 2000, the first such surpluses in several decades. Sadly for America, a Republican named George W. Bush followed Clinton and turned a balanced budget and a CBO forecast of a $5.6 trillion federal surplus (ten years), into a disaster. Upon entering office, Bush and a Republican-dominated congress quickly slashed taxes for the rich by a whopping $1.4 trillion in 2001 and another $550 billion in 2003. The result? The Clinton surplus vanished and the federal debt again exploded, from $5.7 to $10.6 trillion. (Incredibly, at that time Republican darling Paul Ryan attacked Bush, calling his tax cuts “too small”.) Record tax giveaways, the illegal war in Iraq, widespread deregulation under Bush, and pervasive corruption in the banking industry brought the nation’s economy to near collapse. After eight years of Bush, President Obama entered office with federal debt of leviathan proportions and an American economy rapidly sinking into oblivion.
If the nominal corporate tax rate was 90% today, as it was in the 1950s, and the nation was in recession, the argument for simulative tax cuts might make sense. However, the corporate tax rate is now nearly the lowest it has been in at least 75 years and the nation is now at or near full employment. A study by the non-partisan Congressional Research Service tracking tax cuts and economic growth over the last 65 years, shows that tax cuts for corporations and the wealthy do not lead to economic growth, but do contribute directly to income inequality. Janet Yellen, Chair of the Federal Reserve and someone who actually knows something about economics, has warned that Trump’s tax cuts will dramatically drive up the federal debt even further, and when combined with Trump’s massive infrastructure spending plans, will overheat the economy. To throttle that, the fed would be forced to rapidly increase interest rates, never good for business.
Every time the Republicans raise the issue of the federal debt, the president is a Democrat and the Republican demand is to slash programs that benefit American citizens – the middle class, veterans, students, the disadvantaged, the elderly and the disabled, i.e., the 99 percent. And every time the president is a Republican, they quickly move to cut taxes for corporations and the wealthy, absolutely regardless of the state of the economy or the size of the federal debt. Republicans never look back and examine the destruction their greed delivers. They never consider raising taxes on the corporations who have benefitted so incredibly, for so many decades, from the world-renowned productivity of the American worker.
Even the Republican “healthcare plan” is nothing more than a massive tax giveaway, mostly to the wealthy, with no regard to the tens of millions who will lose health insurance and the thousands of Americans who will perish. The Republican healthcare plan would cut taxes by nearly $1 trillion over a decade for health insurers, pharmaceutical companies, and investors. Plus, the richest one percent of American households would enjoy tax cuts averaging $37,000 per year, or 2.1% of their income, while those with the lowest income would see a $150 tax cut, or 0.95% of their earnings. Yes, a $150 tax cut is supposed to help the poor buy healthcare. This is how Republicans “govern”. Rural Americans would be hardest hit by the Republican healthcare plan, the very same people who still give Trump his strongest support. Talk about people voting against their own interests.
There truly is no such thing as Republican governance. Republicans are not about governing the nation for the benefit of all of its citizens. Republicans see the nation as giant piggy bank to be smashed and raided whenever they get the chance, which is whenever they are elected. Why would anyone in their right mind, other than the richest one percent, vote Republican? Oh, you know the answers. It’s abortion. Women must never be able to get abortions. For some, this single issue is why they vote Republican. Or it’s equal pay for women. Women cannot possibly expect to be paid the same as men, what are they thinking? Or it’s “the gays” who for some reason, want to be treated like people too. Or it’s minorities, dark skinned people who have the gall to think they could live comfortably in a white world. Or it’s 1.6 billion Muslims terrorists hiding under our beds. Or it’s guns; we never have enough guns. Americans are ten times more likely to be killed by guns than people in any other developed country – ten times!
A Paul Simon tune comes to mind: “Slip Sliding Away”. I think if there ever was a time to get active in politics, this is it.
Copyright 2017 Daniel R. Cobb