Tax cuts and stimulus, arguments miss the point

Why bother reducing the corporate tax rate. According to this piece, "New Data Show U.S. Has Fourth Highest Corporate Tax Rate," the U.S. has the fourth highest tax rate of industrialized countries, especially when state tax rates are included.

However, most companies, at least the large corporations that generate lots of revenue, pay little taxes. E.g., "Most US firms paid no income taxes in '90s," from the Boston Globe. From the article (2004):

More than half of US corporations paid no federal income taxes during the boom years of the late 1990s, and those that did were able to shelter much of their income, according to congressional accountants.

The report by the General Accounting Office raises questions about whether the corporate income tax burden is too light and distributed unequally. It could undermine arguments that US companies are overtaxed and provide ammunition to politicians and activists who claim companies are using loopholes to avoid paying their fair share.

"This describes a problem in the corporate tax system in which a good many of these companies are avoiding any tax obligation at all," said Senator Byron L. Dorgan, a North Dakota Democrat and former state tax commissioner who requested the GAO study. "We've got a bad tax law that tells ordinary folks, `You pay up,' and allows some of the largest enterprises to avoid paying."

The share of tax receipts paid by corporations has been declining for decades, US government figures show. But it has been falling at an even faster rate in many other countries, said Gary Hufbauer, senior fellow at the Institute for International Economics, and any attempt to raise corporate taxes or close loopholes in this country runs the risk of making US companies less competitive in world markets.