Big Business Gets Big Subsidies

Big Business Gets Big Subsidies November 21, 2011

ThinkProgress links to a new study by Citizens for Tax Justice that shows four industries — financial; utilities, gas and electric; telecommunications; and oil, gas and pipelines — receive more than 50% of all tax subsidies. But pay particular attention to the real tax rate of those companies in this list:

The average effective tax rate of those top four industries is 10.8%. So much for the idea that corporate taxes in the United States are the highest in the world and that this is what is keeping the economy down. In the 1950s, corporate taxes were over 30% of federal revenue. Last year they were less than 9%. Total federal taxes are lower as a percentage of GDP than they have been since the end of WW2 at 14.9% (the average is over 18%), and corporate taxes are only 1.8% — by far the lowest in the industrialized world.

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  • d cwilson

    I’ve often wondered why many of the same people who insist that renewable energy must be profitable coming out of the gate with no help from the government have no problem with the fact that even though the fossil fuel industry is highly profitable, they still receive huge taxpayer subsidies.

  • Industrial Machinery’s tax rate is -13.5%??

  • That’s certainly a clever way to reframe it for another worthy topic, d cwilson. Well said.

    The average effective tax rate of those top four industries is 10.8%. So much for the idea that corporate taxes in the United States are the highest in the world and that this is what is keeping the economy down. In the 1950s, corporate taxes were over 30% of federal revenue. Last year they were less than 9%. Total federal taxes are lower as a percentage of GDP than they have been since the end of WW2 at 14.9% (the average is over 18%), and corporate taxes are only 1.8% — by far the lowest in the industrialized world.

    If it was good enough for America’s Greatest Generation, why’s it not good enough for us?

    An idea of how to frame this for a wingnut: “If a business needs their corporate tax to be so low to remain competitive, why should we baby them? If they couldn’t succeed in other developed nations with higher corporate taxes, why should they be allowed to sponge off of American subsidies?”

  • dingojack

    Big Business Gets Big Subsidies“.

    And in other news – water discovered to be wet. Film at 11.

    @@

    Dingo

  • The sad thing for a lot of US citizens these days: They apparently need to be told that water is wet. Just a few years ago, I was blissfully ignorant of these subsidies as well as their scale.

  • Michael Heath

    I think we must tax corporations/businesses at a lower effective rate relative to what we have in the past. That’s because conditions have dramatically changed globally where we have a competitive cost disadvantage in areas where we don’t want to compete, especially on wages. Taxation is an area where we can compete, and must if we want a healthy labor market and growing economy.

    However, and it’s a ginormous however, our priorities and therefore the results as reflected above reveal the power of lobbyists – especially in aging, cash cow industries. Those who should be paying a relatively higher rate are in fact enjoying relatively low rates. We should especially advocate for very low effective tax rates in two areas:

    1) Where we want to compete for business which is also considering other locations, both in developed economies and developing economies.

    2) Where we want to build/rebuild an infrastructure.

    An industry like solar power meets both criteria where it may be economically prudent their effective rates are low and perhaps even negative. The oil and coal industries enjoy subsidies which not only harm our economy, they also enjoy the avoidance of current and future costs which promote consumption of both relative to other energy sources in a manner that directly harms our current and long-term interests, the latter in a catastrophic manner.

    Where we do replace these revenues? We need an across the board higher tax base on individuals, especially those in the highest income brackets. The GOP continues to conflate businesses and individual tax liabilities – they are of course, effectively lying. Only about 13% of all revenue from the high income tax brackets comes from individuals reporting their income from their businesses through their 1040s/AMTs. So Speaker Boehner et all continue to lie that increasing the individual rate harms businesses ability to hire, in fact businesses have more than ample cash to invest/hire now where they sit on their cash in spite of incredibly low cost of capital.

    I don’t find the 9% share of GDP a compelling factor in regards to deciding what effective tax rates should be. Instead we should be comparing effective tax rates for U.S. operated businesses against other countries. And not a comparison of effective taxation rates to rates only, but instead within the sum of all costs for those businesses considering which country to locate new projects or new or ongoing operations, e.g., wages (including healthcare and other benefits). For example, if one country pays for healthcare through taxes where we mostly pay employee healthcare effectively as part of their total wage, than we have to make some adjustments to get a true apples-to-apples comparison. In fact I’d argue that 9% low share of the burden is a strong indicator we should be compelled to eradicate some federal business taxes given their disproportionate control of our government corporations have in spite of paying such a paltry burden. It’d be one way of increasing control of our government back from corporations to the people since they’d have less levers and incentive to control D.C.

    I wonder how a Democratic initiative to eradicate business income taxes along with taxes on dividends and capital gains*, and replacing this with a simplified yet still progressive income tax, consumption tax on at least luxury goods/services if not across-the-board (with rebates/exceptions), and more revenue from estate taxes would fly. Would it cause a civil war within the groups which now have financial control of the Republican party?

    *Hedge fund managers get taxed on the lower capital gains tax not because they earn gains on capital, but instead because of some tax loophole language that misrepresents their income as capital gains. So I’m not promoting they pay no taxes on their income, I’m instead focusing on real capital gains. They should of course pay income taxes on their income equal to their commiserate income level. Liberals do themselves a disservice when they use this argument when they oppose lower capital gains taxes – though other good arguments opposing my position do exist.

  • Pierce R. Butler

    The sector which is arguably the most universally needed, health care, pays the highest effective tax rate of all?

    Michael Heath @ # 3 argues for an economically strategic tax structure, but the facts in the above chart indicate that US tax policy has no strategy at all except the varying influence of individual lobbies.

  • Pierce R. Butler

    Oops – in # 7, that should be: “… Michael Heath @ # 6 …”

  • Hercules Grytpype-Thynne

    @Bronze Dog:

    It’s worse than that. Recent results in psychology indicate that the more certain people are told that water is wet, the more they’ll cling to the belief that it isn’t.