Whining about corporate tax rates

One of several mantras Republicans are chanting these days is the following: "Corporate tax rates are too high. Businesses will leave the U.S. We will lose jobs."

That ditching the nation and the taxpayers who nurtured them (not least through taking on "externalized" business expenses) would be unpatriotic and morally contemptible; that big corporations are already moving their headquarters to foreign "mail drops" in order to evade U.S. taxes; that regardless of where the putative corporate headquarters might be, they are already shipping U.S. jobs overseas ... all of this is omitted. Also omitted is that the only loyalty that matters to the corporate masters and their political lackeys is loyalty to profit.

But let's bracket all that and set it aside for the moment, focusing on corporate taxes themselves. The important concept here is the difference between nominal tax rates and actual tax rates. What's left if you subtract the latter from the former is known as the "effective tax rate."

Effective tax rate. Your effective tax rate is the rate you actually pay on all of your taxable income. You find your annual effective rate by dividing the tax you paid in the year by your taxable income for the year.

    Dictionary of Financial Terms.

[Remember that to divide zero by any number =  zero.]

Think of it as like buying a new car. The nominal tax rate is equivalent to the sticker price on that car. 98% of the time the sticker price is merely a starting point for negotiation. Same with the nominal tax rate. In buying a new car the only thing that matters is the price you actually pay. Same with taxes: the only thing that matters is the tax you actually pay.


[Haven't figured out how to insert an image. This would have been an automobile one might be purchasing.]


Two-thirds of major corporations operating in the U.S. pay nothing in corporate taxes. Niente. Nothing. Zero. And, since zero divided by any other number = zero, that means the effective tax rate paid by two-thirds of major corporations is 0% -- 0, zero, zippo, bubkus ...


[This would have been an image of a corporate tax bill, showing a "friends' discount" leading to a rate of 0%.]


It gets even better, of course. Remember the ginormous refund that GE received? They're hardly alone. Far from being oppressed by U.S. tax rates/loopholes, far from paying their fair share, these corporations are taking money from the rest of us.

How much more do they want to take -- not pay, but take -- from our nation and its legitimate taxpayers? What cost do they want to exact from the most defenseless of American citizens? how much pain, social disruption, destruction of infrastructure are they willing (eager?) to inflict?

< Cather's "Paul's Case" ... and ours. | Tornadoes, Missouri, and perspective >
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