Politicians Fiddle While America’s Corporate Tax System Burns

CATO ^ | 10/30/09

[FromLori]

KPMG has released its annual global survey of corporate tax systems. For the 10th consecutive year, the average corporate tax rate fell, and it is now down to 25.5 percent — and just 23.2 percent in the European Union!

In the United States, unfortunately, the corporate tax rates remains stuck at about 40 percent. Only one developed nation, Japan, has a more punitive regime.

That’s something to keep in mind the next time a politician complains that jobs are going to China, where the corporate tax rate is 25 percent.

[Willie Green]

KPMG has released its annual global survey of corporate tax systems.

Just a reminder: KPMG is "too big to fail".

[kingu]

Okay, let’s take a moment and look at things honestly. A company decides to send their work to China to be done. Is it because of a lower tax rate? Heck no - that ‘tax savings’ is burned up in extra costs - managers want more money to relocate, you got loads of money going to China’s military to bribe them, increased shipping costs, greater time in transit, which of course costs money.

So, yeah, whining about the corporate tax rate and laying any blame on it is pretty useless. It is a problem, but certainly not the reason why companies go overseas.

What is driving companies overseas is ultra high employee costs and regulatory costs of complying with an increasingly insane environmental system. Employee unions are increasingly demanding higher and higher benefits, wages and retirements. Government regulations are putting higher and higher requirements on controlling environmental contamination, setting the bar higher and higher each year to justify their continued existence.

And it is not just at the manufacturing level this is happening, but even at the raw material level. A steel foundry in the US faces ultra high costs just in getting the raw materials to operate, then faces hurdles put forward by employees and government to continue operation. That they’d take their knowledge and go build a plant overseas, still making the same amount of money for themselves, while the host country gains employment and raw materials for their other factories is a win win for them, and a devastating loss for us.

We don’t need lowered corporate taxes, we need to quash the burdens that government place on business. We need to dial back environmental laws, the mandates for benefits, and the onerous labor laws that ensure that everyone is unemployed equally. What we need is less regulation at all levels.

Some are demanding more regulation of Wall Street. If Wall Street was unregulated, do you think that people would be dumping billions of dollars into insane gambles? Of course not, they’d think that was a con, but because of regulation, there is an assumption that it is a safe investment. Take away that regulation, open Wall Street to prosecution for theft and fraud by the various states, and the mess will clean itself in a short time.

Dial back government, and everyone will thrive. Continue to expand it, and there is but one end result - all of us working to support our government, while those with the means will go to other locals where they aren’t working to support our government, but instead working to support themselves.

[1rudeboy]

U.S. corporations pay income tax to the U.S. Treasury on their global income, absent some sort of a tax treaty with the corresponding nation.

[1rudeboy]

So, because KPMG is “too big to fail,” what is the real corporate tax rate?

[Willie Green]

So, because KPMG is “too big to fail,” what is the real corporate tax rate?

You can be certain that KPMG would call it "too high" even if it was ZERO.

[liberty or death]

When my kids see the company sales figure they think Mom and Dad are rich. Then I show them the profit and loss.(???) Then I show them all of the “Pre-Tax” payments and when they see 40% going to the bloated bureaucracy we call Washington and Montana it absolutely steams them.

[1rudeboy]

That's two non-sequiturs in a row, Willie. You can almost be certain that the higher the corporate tax rate, the more fees KPMG collects.

[Willie Green]

And it is not just at the manufacturing level this is happening, but even at the raw material level.

Mining and manufacturing are easy targets.
Take a look at high-tech white collar: computer programming gets instantaneously downsized and outsourced for Third World wages also.

[Willie Green]

You can almost be certain that the higher the corporate tax rate, the more fees KPMG collects.

KPMG's business involves much more than just tax shelter frauds.

[1rudeboy]

And KPMG is a bourgeois firm, anyway . . . right?

[1rudeboy]

I was just pondering something: if the prevailing theme is that corporate income taxes are not the problem, or at least not one of the major problems, then why should we object that U.S. manufacturing firms pay the highest (or second-highest, depending on the measure) corporate income tax rate in the world? They’re just paying their “fair share,” right? It’s only manufacturing, anyway.

[khnyny]

IIRC, Mitt Romney was the only candidate who proposed lowering the US corp tax rate. Good idea, but I don’t think anybody really listened.

We ended up getting “hope and change.”

[parsifal]

40% is just the highest marginal tax RATE. It doesn’t mean corporations pay that rate because they will do things to lower their income. BTW, increasing worker salaries would mean the gov’t pays almost half the bill!

parsy, who skimmed thru the report

[rdb3]

In the United States, unfortunately, the corporate tax rates remains stuck at about 40 percent. Only one developed nation, Japan, has a more punitive regime.

That’s something to keep in mind the next time a politician complains that jobs are going to China, where the corporate tax rate is 25 percent

Ain't that the truth. Add to that heavy regulations. Yet no one who jibber-jabbers the most about jobs leaving the U.S. on the right say anything about these truths.

[old curmudgeon]

All though I do think corporate tax is too high, I agree with the other points.

Sometime ago, it came to me that the most often reason manufacturing gives for going to China, lower wages, is only minimally correct but an easy answer because it is short, quick, uncomplicated and easy on a lazy mind.

The facts are that wages in China were lower than in the US 100 years ago.

So what has changed?

Well yes, taxes.
But also, and more important:

Unreasonable unions
Retirement and benefit plans
Health care plans
EPA
CAFE
OSHA
Mandatory insurance of various types such as workman's comp, unemployment, social security, medicare health, etc.

Then there are the multiple layers of local fees, taxes, permits, inspectors, etc.

Just a few of the many many hidden costs. So it is the hidden costs, some of which are hidden taxes, that break the back of manufacturing in the USA.

So although it is important, corporate taxation is just one of many reasons manufacturing is leaving the USA. Like wages, it is important and obvious but far from the real story.

In reality, manufacturing has not been attracted to China. On the contrary, it has been chased out of the USA by all of the above and many other similar factors to lengthy to list here.

[FormerACLUmember]

Ireland is the place for entrepreneurs to be, IMHO.

[Wonder Warthog]

"You can be certain that KPMG would call it "too high" even if it was ZERO."

The truth of the matter is that no corporation actually pays any tax. EVERY tax applied to business is simply a different pathway to extract money from individuals, whether that by by a direct tax (sales, income) or indirect (as in raised prices due to the "corporate" tax).