Math Proves the Left’s Obsession With Corporate Taxes is Futile

Captain Capitalism:

It is coming up on 5 years now that I have avoided getting into debates or arguments with leftists in person or at social settings.  I sit there, ignoring them at parties, knowing full well the BEST outcome is them saying “agree to disagree” and the worst is me being asked to leave as I offended the effeminate and weak sensibilities of Minneapolis’ effete and aging Gen X intellectual class.  However, while that is how I handle myself in personal situations, I am not unaware of the general political pulse of the nation, as I am constantly reminded of society’s ignorance online.

Be it comments sections, links, articles, news, or posts I am acutely aware that nothing has changed and have likely gotten worse.  College students and their professors are hard to discern as they throw equally childish and victim-whoring temper tantrums over adult-world realities.  Democrats don’t even try anymore to come up with convincing lies about national debts and e-mail servers.  And every soccer mom is seemingly rushing to have her precious (and otherwise completely normal) child diagnosed with the latest mental disorder to excuse her and her husband’s lack of parenting.  It’s an insane world, and I take solace in that I no longer care and am just going to watch the show as I imbibe in as much Rumpleminze as possible before it’s over.

However, every once in a while a leftist choir will sing a chorus that is so parroted, so knee jerk and so Goebbels that it compels me to dust off my ole Economist hat, fire up by economist spidey senses, and do a little research that will debunk the lie indisputably.  Not because I want to have the research to point to at a later date should I be debating a leftist and need it.  Not because I wanted to know for a fact what the truth of the matter was.  But merely to piss them off and force their brains to the uncomfortable brink of cognitive dissonance as quickly as possible.  And chorus the choir was singing this time was “evil corporate tax breaks.”

Now this chorus has many variations:

If corporations paid what they did in 1950 all our problems would be solved
Corporations get all this “corporate welfare”

and the always bland, non-discript and completely void of any intelligence whatsoever

Corporations don’t pay their fair share!

So I did a little bit of digging, pulled the national data on corporate profits and corporate taxes going back to 1947, and have more than enough data to put an end to this debate and the above claims once and for all.

First, corporate welfare.

Unfortunately, this isn’t a matter of facts or statistics, as much as it is the left’s complete ignorance of basic accounting.  Because there is no such thing as “corporate welfare” UNLESS you want to consider the bank bailouts and grant money to solar companies welfare.  In that case, yes, that IS corporate welfare and it is wrong.  But sadly most leftists confuse merely giving corporations a TAX BREAK with a HANDOUT like welfare.

The truth is that all taxes (corporate or individual) are based on there being a profit to tax in the first place.  This is the concept of “before tax profit,” the amount of money left over after a company deducts all of its operating expenses from its total revenues.  This “before tax profit” is the amount taxed because taxing a company on its revenue would be like taxing a father of five on his gross salary.  Certain expenses need to be deducted so that the individual/corporation can pay for vital expenses to merely exist and run a business.

Now the stated corporate tax rate is 40% in the US (and most states).  However, sometimes local and national governments will give a corporation a tax break if they invest in a certain town, build a plant in an impoverished area, etc. etc.  However, this is NOT welfare.  It is merely LOWERING the tax the company has to pay to the government.  So instead of paying 40% the company pays 35% or 30%.  The company did not “collect a welfare check” that required the taxpayers to bail it out.  It was already self-supporting itself and NOT parasiting off of society.  It is merely just a lowering of its tax bill.

Understanding this fact allows us to move onto chorus #2, “Corporations use tax loopholes to lower their taxes!”

You damn right they do.  And it’s all legal.

Historically, the left was right.  In one year (1951) the effective tax rate was 50% for US corporations and yes the economy was booming back then.  However, this had more to do with the fact the US was the only industrialized economy remaining in the world and our corporations were the sole suppliers of goods to the world.  That argument aside, the effective corporate tax rate has since gone down to today’s rate of 25%.

This effective rate of 25% (whilst the statutory rate is 40%) proves corporations are indeed using whatever loopholes they can to park money overseas and lower their tax bills.

However, while the left will jump to say, “SEE!!! SEE!!!!!!” they need to realize it’s a Pyrrhic victory.  The reason why is that corporate taxes are out of their control.  Many other countries have found that instead of hating and villainizing corporations, they’d rather woo them (and their jobs) to their home countries.  And they do this byLOWERING, if not ELIMINATING corporate taxes.  This has given rise to rich nation states such as Hong Kong, Singapore, Bermuda, the Caymans, Lichtenstein and Luxembourg, as well as corporations (who are global in nature) simply moving their HQ’s and operations to tax-friendlier countries.  And no matter how desperate you are to get them to pay those 50% tax rates they did back in 1951, the more you squeeze them, the more they flee.

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