The Three Biggest Lies About Why Corporate Taxes Should Be Lowered

This post originally ran on Robert Reich’s Web page.

Instead of spending August on the beach, corporate lobbyists are readying arguments for when Congress returns in September about why corporate taxes should be lowered.

But they’re lies. You need to know why so you can spread the truth.

Lie #1: U.S. corporate tax rates are higher than the tax rates of other big economies. Wrong. After deductions and tax credits, the average corporate tax rate in the U.S. is lower. According to the Congressional Research Service, the United States has an effective corporate tax rate of 27.1%, compared to an average of 27.7% in the other large economies of the world.

Lie #2: U.S. corporations need lower taxes in order to make investments in new jobs. Wrong again. Corporations are sitting on almost $2 trillion of cash they don’t know what to do with. The 1000 largest U.S. corporations alone are hoarding almost $1 trillion.

Rather than investing in expansion, they’re buying back their own stocks or raising dividends. They have no economic incentive to expand unless or until consumers want to buy more, but consumer spending is pinched because the middle class keeps shrinking and the median wage, adjusted for inflation, keeps dropping.

Lie #3: U.S. corporations need a tax break in order to be globally competitive. Baloney. The “competitiveness” of American corporations is becoming a meaningless term because most big U.S. corporations are no longer American companies at all. The biggest have been creating way more jobs abroad than in the U.S.

A growing percent of their customers are outside the U.S. Their investors are global. They do their R&D all over the world. And they park their profits wherever taxes are lowest — another reason they pay so little in taxes. (Don’t be fooled that a “tax amnesty” that will bring all that money back to America and generate lots of new investments and jobs here — see item #2 above).

Corporations want corporate tax reduction to be the centerpiece of “tax reform” come the fall. The President has already signaled a willingness to sign on in return for more infrastructure investment. But the arguments for corporate tax reduction are specious.

Robert B. Reich, chancellor’s professor of public policy at UC Berkeley, was secretary of labor in the Clinton administration. Time magazine named him one of the 10 most effective Cabinet secretaries of the last century. He has written 13 books, including the best-sellers “Aftershock” and “The Work of Nations.” His latest, “Beyond Outrage,” is now out in paperback. He is also a founding editor of The American Prospect magazine and chairman of Common Cause.