by Dave Hunt
Today we have a guest post from Dave Hunt of Tipton. Dave is a retired teacher from North Cedar High School and a former Iowa Teacher of the Year.
Mitt Romney has advocated cutting the corporate tax rate from 35% to 25%. The theory is that jobs would be created and that we would become more competitive. It’s interesting that people keep repeating this argument even though there is remarkably little economic evidence to support it.
What has the impact of corporate taxes actually been? In the 1950’s these taxes accounted for 30% of the government’s revenue but by 2010 this had dropped to 6%. Current data doesn’t support the contention that corporations are suffering under an “oppressive” tax burden. Profits are up, with the Commerce Department reporting that corporate profits, during the fourth quarter of 2010, reached their highest level in history. Currently they are sitting on the highest cash to asset level since the 1950’s.
An examination of what corporations are actually paying in taxes will show that the tax avoidance industry is booming. For example G.E. has tasked 974 people to do this job. Overall in the last 10 years corporations have paid 1/3 less in taxes while seeing a 60% rise in profits. Through effective lobbying corporate tax avoiders have carved out 400 billion dollars worth of loopholes.
One of their favorite tax dodges is the creation of foreign subsidiaries based in tax havens. Citi Bank for example has 427 foreign subsidiaries, 91 in Luxembourg and 90 in the Cayman Islands. In fact the Cayman Islands are so popular that over 15,000 corporate subsidiaries are registered in one building.
Worst of all in 2010 thirty corporations with 160 billion dollars in profits paid no taxes at all. Among these were Bank of America, Citi Group, Exxon-Mobile, Verizon, Boeing, Wells Fargo, and G.E. This problem is not limited to Federal taxes, 68 corporations reported paying no state income taxes for at least one year from 2008-2010.
Don’t expect Romney to address the problem of tax avoidance. He has refused to release more than one year of his tax returns and during his time as chairman of the audit committee at Marriot (a pioneer in tax avoidance), a fine of 29 million dollars was levied by a judge who characterized one of their tax shelters as “pure fiction”.