Democratic presidential candidate and Vermont Senator Bernie Sanders, who has made fighting “income inequality” a major theme of his campaign, commissioned a report by the Government Accountability Office concerning how much American corporations pay in federal income taxes.
The report is in, with the GAO finding that many U.S. corporations pay very little in such taxes, if they even pay any at all.
From Reuters:
At least two-thirds of all active U.S. corporations paid nothing in federal income taxes during the 2006-12 period, despite an income-dependent statutory tax rate of 15 percent to 35 percent, the Government Accountability Office said in a recent report…
The report from the nonpartisan federal auditing agency said profitable corporations were able to use tax deductions and incentives to lessen their federal tax burdens in a given year, sometimes bringing their amount paid to zero.
Profitable corporations, on average, from 2008 to 2012, paid just 14 percent of their earnings in federal income taxes.
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While it is outrageous on the surface that some corporations manage to completely evade their tax obligations, it actually points to a larger problem. The U.S. has an average state and federal corporate tax rate of 39 percent, according to the Tax Foundation. That makes the U.S.’s corporate tax rate the third highest in the world.
Such a high corporate tax rate has incentivized two things. First, corporations hire lobbyists to create loopholes in the corporate tax code to lower their overall taxes. Second, corporations hire armies of accountants to exploit the tax loopholes.
Bernie Sanders, who used the report to denounce large corporations, thinks he can get them to pay more by simply closing the corporate tax loopholes. But that’s not true. Capital can easily cross borders at the push of a button in this global economy.
The solution is to actually lower the corporate tax rates and make the corporate tax code simpler, with fewer loopholes. The average global corporate tax rate is 22.86 percent, while the average rate for OECD members, which is an organization of developed, market economies, is 24.99 percent. Even worse for the U.S., the rest of the world is still cutting their corporate tax rates.
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Many U.S. corporations are not paying federal income taxes, and the corporate tax code has way too many loopholes. However, the root cause is that corporate taxes are too high compared to the rest of the world.
Bernie Sanders screaming about corporations not paying their “fair share” is like Donald Trump blaming all of America’s problems on immigrants and Muslims. It feels good and feeds the mob, but it doesn’t actually solve anything.
AP Photo/Matt Rourke
