Political Nutz

Observations on the pathetic state of American politics

Corporate Welfare: Funded by Me and You

I can’t just leave this article without comment. Writing in the New York Times, UC-Berkeley professor Laura D’Andrea Tyson tries to justify further reductions in corporate tax rates. Her article begins with a chart showing the 40% nominal corporate tax rate in the U.S. compared to much lower rates in other parts of the world.  She fails to mention that companies in the U.S. pay at an effective rate of about 6% and that many of the very largest pay no taxes at all.

Eventually, the esteemed professor gets to some “promising ways to pay for a significant reduction in the corporate tax rate.”  She writes:


Prof. Michael Graetz of Columbia Law School told the Senate Finance Committee that the shortfall in corporate tax revenues resulting from a cut in the corporate tax rate could be offset by the imposition of a corporate withholding tax on dividend and interest payments to shareholders and bondholders.

So think about that for a moment.  Who receives dividends and interest payments? Who are the shareholders and bondholders?  Well, they are you, me, employees, pension funds.  Working class folks who are already paying our fair share of taxes.

How about an “excessive income” tax on the CEOs and other top executives who are reaping seven and eight figure salaries and bonuses while the rest of us haven’t had a real raise in pay in over thirty years?

Former Michigan governor John Engler wrote in the Wall Street Journal that “American businesses and workers are at a severe competitive disadvantage because U.S. companies are burdened with both statutory and effective rates that are higher than those faced by most foreign-headquartered competitors.”

Sorry, Mr. Engler… that’s just not true.  And even if it were true I still don’t get it.

U.S.corporations are sitting on record profits, they have never had more cash on hand.  They have the lowest effective tax rate in the world. Worker productivity has nearly doubled over the past 30 years.  The bottom line for American companies has never been better.  Why is there this incessant whining about mythical high taxes and the negative effect it has on U.S. business?

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