Blog on the Run: Reloaded

Friday, July 26, 2013 6:19 pm

Our overburdened corporations

The Washington Post had a chart on how corporate taxes have been rising as a share of GDP in OECD countries (industrialized countries comparable for economic purposes to the United States). The problem is that the piece was a tad misleading in that every country counted the same.

In the U.S. that burden has been generally shrinking since World War II. As of 2009, that burden was 1%, down from its postwar high of 6% just after the Korean War. Here’s a chart showing how it’s gone:

Corporate Income Tax as a Share of GDP 1946 - 2009

Now, corporations are sitting on $2 trillion in cash. If they’re not going to create jobs with it, which they’re not because there’s no demand for their goods and services because too many people have been unemployed for too long, then they ought to pay a bit more of it to the government so that we can set about some badly needed infrastructure projects. Those projects, in turn, will both create jobs in the short term and lay the foundation for future wealth creation in the long term.

This is not rocket science. This is not even rocket economics.

(h/t: Dean Baker)

1 Comment

  1. It’s not rocket science, but it’s vehemently opposed by conservatives. Corporations are usually, as a sector, net borrowers. But recently they’ve been net lenders. Translation: they’re sitting on piles of cash.

    The other point worth making here is that whenever the topic of corporate taxes is raised, Republicans invariably claim that the U.S. has a higher tax rate than other industrialized nations, and therefore we must lower it. The first part is true, as far as that goes. As your diagram makes clear, the U.S.’s statutory corporate income tax rate is only half (and really less than half) the story. U.S. corporations have myriad ways to reduce their effective tax rate dramatically, as we see in stories about GE’s zero tax bill, etc. Yes, our statutory rate is 35%, but the effective tax rate is something like 11%, and falling. Hence your diagram.

    Meanwhile, corporate profits as a percentage of GDP are rising, and wage income as a percentage of GDP is falling. If corporations are people, those folks are doing just fine.

    Comment by Andrew Brod — Friday, July 26, 2013 8:02 pm @ 8:02 pm

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