Some Truths About Taxes

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One of the talking points for the Tea Party and many Republicans is that business is being taxed too much. Another talking point is that businesses are not creating jobs because they are either 1) taxed too  much or 2) afraid they will be taxed too much in the future. While these make good talking points for the talking point parrots to repeat, it is well worth considering facts about taxes and corporations.

A recent study of thirty large American corporations reveals some interesting facts.  First, all of these companies spent more lobbying the government ($476 million) than they spent on taxes. Second, 29 of the corporations paid no taxes and, in fact, received tax rebates ($11 billion combined). One company, FedEx paid taxes at a 1% rate. Third, the firms donated $22 million combined to federal election campaigns. Third, while all these corporations are profitable, many of them have laid off significant numbers of employees (perhaps explaining the profits). Finally, most of the companies have increased the compensation for their top executives (a few have decreased such compensation).

In the case of these corporations, it seems rather clear that they are not over taxed. After all, 29 of them got rebates and only one paid taxes at a 1% rate. It could, of course, be argued that these corporations are exceptions and that less connected businesses pay significant (or even unfair) taxes. If this is the case, this would suggest that the tax remedy does not lie in simply lowering taxes but addressing the aspects of the system that allow these thirty corporations to gain what would seem to be a rather unfair advantage over most Americans and perhaps other businesses as well.

It also seems clear that high taxes or fear of taxes is causing these business to not create jobs. After all, 29 of them paid no taxes and one paid at the 1% rate. However, rather than creating jobs some of these companies cut jobs. As noted above, cutting employees is a way of creating profits. In the face of this evidence, it seems rather difficult to blame Obama for the failure of these companies to create jobs: they have no (or little) tax burden and are profitable. So profitable, in fact, that they can spend generously in buying access and in providing sweet compensation to the top executives. In this system, the top executives and the folks in Washington are the clear winners while the American people (especially the people who were laid off by some of these companies) are the clear losers.

This situation indicates one harm of the current lobbying system-it enables certain corporations to be able to acquire unfair advantages. This is hardly creating the free market that ends up in so many talking points. It also indicates another harm-companies need to lobby to gain these advantages that are given by politicians. That is, these politicians seem to either be blackmailing corporations (“don’t want to pay at the 35% tax rate? Just donate. And lobby. Otherwise…”) or in cahoots with them (“you scratch our backs with millions of dollars and we will scratch you back with some major tax breaks…hey, it is just the citizens’ money!”).