Republicans struggle to defend corporate tax windfall
President Biden has managed to marry something most Americans want (infrastructure) with something they do not mind one bit (higher taxes on corporations). It is a political no-brainer: Do you want better roads, bridges, ports, broadband and more, if corporations that have paid little or no taxes foot the bill? Only a GOP corporate donor and its recipients would say no.
You can see how the argument fares. Transportation Secretary Pete Buttigieg sounded altogether reasonable on “Meet the Press” on Sunday when he argued, “We’re just asking corporations to pay their fair share at a rate … that would be lower than it’s been for most of my life.”
Corporations are hard-pressed to scream poverty. The Institute on Taxation and Economic Policy found 55 big companies that paid no federal income taxes at all last year: “The tax-avoiding companies represent various industries and collectively enjoyed almost $40.5 billion in U.S. pretax income in 2020, according to their annual financial reports.” Had they actually paid at the current rate, 21 percent, collectively they would have paid $8.5 billion, the institute found. Instead, these businesses “received $3.5 billion in tax rebates.” In short, “Their total corporate tax breaks for 2020, including $8.5 billion in tax avoidance and $3.5 billion in rebates, comes to $12 billion.”
By contrast, Sen. Roger Wicker (R-Miss.), whose state is ranked by CNBC as having the 10th-worst infrastructure in the country, plaintively asked on the same show: “How could the president expect to have bipartisanship when his proposal is a repeal of one of our signature issues in 2017, where we cut the tax rate and made the United States finally more competitive when it comes to the way we treat job creators?” The problem with that statement is that tax cuts have certainly been trimmed before; for instance, George W. Bush’s tax cuts were pared back in 2013.
Under President Barack Obama, Congress agreed to “expiration of cuts to the income, capital gains, and dividend tax rates for filers with taxable income above $450,000 for married couples and $400,000 for singles,” wrote Chye-Ching Huang of the Center on Budget and Policy Priorities in 2013. It also allowed limits on personal exemptions and itemized deductions to be reinstated for those with adjusted gross income of more than $300,000 for married couples and $250,000 for single filers. In the wake of these changes, job growth continued to rise, despite GOP claims that the adjustments would lead to bankruptcies and recession. (Associated Press reporting on a 2016 study of the effects found that “President Barack Obama’s 2013 tax increases for wealthy Americans neither slowed their income growth nor hurt the economy” and that employers had added 5.8 million jobs in 2014 and 2015 — “the strongest two-year growth since the late 1990s.”)
Wicker’s argument also falters because the 2017 tax cuts that were supposed to permanently increase growth and investment produced negligible results. “Corporate revenues were about $40 billion less than projected whereas individual revenue were higher, with an overall revenue reduction of about $9 billion,” the Congressional Research Service found in 2019. “Real wages grew more slowly than GDP,” those researchers found: at a rate of 2 percent, compared with 2.9 percent for overall gross domestic product. “Such slower growth has occurred in the past. The real wage rate for production and nonsupervisory workers grew by 1.2%.”
This was unsurprising since tax cuts turn out to be a poor way to jump-start growth. (“Analysis of six decades of data found that top tax rates ‘have had little association with saving, investment, or productivity growth,’ ” the Atlantic reported in 2012, analyzing another Congressional Research Service study. However, the magazine noted, “the study found that reductions of capital gains taxes and top marginal rate taxes have led to greater income inequality.”)
Wicker did make an interesting concession:
I would like to see evidence that a slight corporate income tax increase to pay for a gigantic infrastructure bill is going to be a net jobs loser. (Studies from Georgetown University and Moody’s Analytics predict significant job growth.) However, maybe there is a level that Wicker would find acceptable: 25 percent? 26 percent?
Whatever the economic data, Republicans will argue on behalf of their corporate donors that any tax hike would be disastrous. But it is a good bet that the public overwhelmingly will reject that argument. Having gorged themselves during the past four years on tax cuts with little benefit to the country at large, corporate America should gird itself for a tsunami of support to raise its taxes just part way back to 35 percent.
Jennifer Rubin writes reported opinion for The Washington Post.
