How Big Business Gets a Free Ride by Lobbying to Raise Your Taxes

How can we reconcile the simple fact that Americans are living in one of the least taxed countries in the developed world with the reality that many working people feel they're being “taxed to death”?

Well, consider this: in the 1940s, corporations paid 43 percent of all the federal income taxes collected in this country. In the 1950s, they picked up the tab for 39 percent. But by the time the 1990s rolled around, corporations were paying just 18.9 percent of federal income taxes, and they forked over the same figure in the first decade of this century. We – working people – paid the difference.

That's because the share of our economy represented by government spending has varied by only a small margin since the 1950s, regardless of which party held Congress or the White House. With a pretty consistent picture on the spending side, every time corporate America lobbies for another tax break or loophole for the benefit of their shareholders, they are effectively raising taxes on American households – on the 90-plus percent of the population who get most of their income from wages rather than investments.

The shift of all these taxes from corporations to individuals and families has been pushed with the help of a Big Lie – growing from a small kernel of truth – told by corporate America, its lackeys in Congress and the media it dominates just about every day: that American companies face some of the highest taxes in the world.

The kernel of truth is that, at 35 percent, we do have one of the highest statutory corporate rates in the world – that is, the rate that's written down in the tax code. But what's written in the tax code is inconsequential compared to the number written on checks sent to the IRS.

What US companies actually pay in taxes is among the lowest figures in the developed world. The effective tax rate is what companies actually fork over. As the non-partisan Center for Budget and Policy Priorities (CBPP) explained, the 35 percent rate the corporate mouthpieces on CNBC are always whining about “does not take into account the generous depreciation rules, exemptions, deductions, and credits (some of which are sometimes termed 'loopholes') that corporations may be eligible for.”

Studies of some of the biggest companies have shown their effective tax rates to be, on average, less than half of what's on the books. But also keep this in mind the next time you hear some corporate flack talking about the burden of taxes on “small businesses.” In most countries, there's one corporate tax rate, but in the US, the rates depend on how much a company earns, and, according to CBPP, “in terms of numbers, most U.S. corporations face a statutory rate lower than the 35 percent top rate.”

Take all of this together, and the U.S. ranked 28th out of 30 countries in the Organization for Economic Cooperation and Development (OECD) (which includes most of the world’s leading economies) in terms of the share of the economy corporations pay in income taxes. At 1.8 percent, our government actually collects around half of the OECD average (PDF).

Now ask yourself how many times you've encountered some talking head on a cable news show blathering on about how we need to cut taxes on corporations or they'll move jobs overseas. And then consider this: between 1999 and 2008, while corporations paid about half of the OECD average on their profits, U.S.-based multinationals jettisoned a net total of 1.9 million workers here at home while creating 2.3 million net jobs overseas.

Why Paul Ryan Doesn't Want to Talk About Tax Cuts for Big Oil

Laying the groundwork for the release of his draconian budget proposal this week – it will reportedly cut $4 trillion in spending over the next decade by killing Medicare and other popular programs, and still raises taxes on most Americans in order to pay for more tax cuts for the wealthy – Rep. Paul Ryan, R-Wisconsin, dodged questions about whether he would consider closing tax loopholes for Big Oil in order to reduce the deficit. “We don’t have a tax problem,” he told Fox News' Chris Wallace. “The problem with our deficit is not because Americans are taxed too little. The problem with our deficit is because Washington spends too much money.”