When does a true statement, subject to certain qualifications, find itself so twisted it becomes a lie? When does the truth become mere political propaganda?
A contender arrives via the New York Times’s op-ed from Gabriel Zucman. He tells us that the amount of GDP paid in the corporate income tax has fallen from 4% to 2% since 1960. This is true so far as it goes. But it’s also terribly misleading. Zucman is pretending that corporations are paying half the tax they used to pay, which isn’t true in the slightest.
That’s because the U.S. has two types of corporations, the C-type and the S-type. The C-type pays the corporate income tax. The S-type is a “pass through” entity in which the owners pay regular income tax on their own tax forms, calculated on the profits of the corporation. As such, the corporate income tax isn’t the only income tax we get from corporations, nor is it the only share of profits that Uncle Sam gets in this regard.
It’s well known in economic circles that the portion of the economy that is C- or S-type has changed markedly over the years. The Congressional Budget Office has released papers on it. In fact, we’ve moved to where more than half of all business income pays the individual, not the corporate, income tax. This makes it easy to understand why the revenue from the corporate income tax has halved.
It isn’t that tax rates themselves are lower. We’ve changed allowances, the tax base and other technical matters at the same time. This means that the same amount of profits pays roughly the same amount of taxes. It’s not tax avoidance, it’s not tax evasion, it’s not offshore, and it’s not even Republicans. We’ve just changed the name of the tax we charge to about half of business profits. The amount collected under the old name is lower, and that’s all there is to it.
Zucman should want to point this out. Instead, he seems determined to obfuscate to advance a political agenda. He’s misleading people into thinking that businesses are paying less tax instead of just different taxes. But the truth is clear. American companies are paying roughly the same amount of tax, as a portion of the whole economy, as they did back 40 and 50 years ago. They’re just paying it differently. Don’t let anyone tell you differently.
