Serious Implications

With the American Middle Class in dire straights, President Obama has appointed Vice President Joe Biden to lead a Middle Class Task Force. The opening meeting featured creation of “green jobs.” Biden might have decided to start with a fairly non-controversial topic. However those jobs are created and promoted, it’s a sure bet that tax legislation will be part of the “equation.” The same is true of initiatives in health care reform, energy, and education, the three top priorities of Obama’s agenda to build an America strong enough to compete and lead in the 21st Century.

Tax reform legislation will be a huge part of the agenda and fights over altering the status quo will be spectacular. Therefore, we need to educate ourselves and prepare for blizzards of tax policy rhetoric.

Tax Rascal has a list of Top Ten Tax Blogs. At the top of the list is Wayne State University Professor Linda Beale’s ataxingmatter, which is also one of the better economics blogs linked in my sidebar. Congratulations Dr. Beale!

Dr. Linda Beale has a good smack-down article about corporate taxes posted at her blog, ataxingmatter.

A favorite Republican talking point we hear, and will continue to hear, is the phoney claim that “U.S. corporartions pay the highest taxes in the world.” Analysis of the complexities of corporate taxation paints a much different picture. A few key points from Dr. Beale’s post:

1. For corporations earning $18 million, the statutory tax rate is 35-percent but loopholes in the tax code, tax shelter schemes, and under-reporting of income (only 2-percent of corporate tax returns get audited), factor together to effectively cut the 35-percent down to about one-third that rate.
2. Corporate taxes worldwide are broken down differently. While U.S. corportions may have relatively high taxes on direct profits, their labor, environmental cleanup, and “social compensation” taxes are third lowest.
3. Analysis done by the World Bank on corporate taxes in 24 industrialized nations shows the U.S. is average, with 12 nations taxing at lower rates, and 11 nations taxing at higher rates.
4. Lowering corporate taxes would not necessarily make U.S. corporations more competitive around the world. Typically, U.S. multinationals compete with other U.S. multinationals, which makes the tax issue a wash.
5. Finally, “the only way competitive gains by US corporations abroad benefit this country is if those gains are translated into jobs at home and manufacturing at home. If corporations want lower taxes, that’s the lever we need to make it work for rest of us.

The whole article at ataxingmatter is good. There’s another good one posted recently on taxpayer subsidized CEO compensation.