Our corporate tax rate is way too high. And some very profitable corporations get away without paying any corporate taxes, while others pay a lot.
I would abolish the entire corporate income tax (because I see corporations, not being humans, as pass-through entities), but short of that goal, we ought to reform the tax — lower the rate and eliminate deductions, credits, and any loopholes that distort the economy or tilt the playing field. Former Senator Ted Kaufman makes a very similar argument in his column today.
His conclusion is important:
Changes in the corporate tax rate will affect all of us. They will determine tax revenues available to help bring the budget deficit under control; encourage innovations, research and development; create jobs in the United States; and improve our competitiveness overseas. There is no question that our major corporations will have their say in the process. I hope that a lot of other voices from across America are heard as well.
I agree with Kaufman’s general point: we don’t want only the lobbyists writing any corporate tax overhaul. But I think he sort of glosses over the potential in this RATE Coalition, which comprises companies from many industries, and which is calling for a lower rate and broader tax base. This sort of broad-based, cross-industry coalition, with many industries giving up their favored breaks as long as other industries also give up their breaks, has the potential to be a good thing.
Here’s a generalization: specific companies care mostly about their own carveouts. Some industries and companies actually benefit from a high rate, because that makes their carveouts worth more. More to the point: lobbyists benefit from a high rate, because it increases both the value of inserting carveouts into the tax code, and the value of being able to win a credit for a client.
The economy as a whole would benefit from a neutral, lower corporate tax. But there is no group with an acute interest in that. That’s why a multi-industry coalition should pique the interest of reformers.
