Jack Nettleton (’13)
While in high school, I attended a speech given by former Washington Governor Dan Evans. Evans, considered by political observers to be the most effective Governor in the state’s history, spoke about his support for increased funding for research of degenerative diseases such as Alzheimer’s and Parkinson’s. A conservative Republican, Evans told the crowd something that has become a staple of my own personal political thinking, “Good ideas are not preceded by a D or an R.” 25 years ago, another popular conservative Republican spoke after signing a tax reform bill saying, “flatter rates will mean more reward for that extra effort and vanishing loopholes will mean that everybody and every corporation will pay their fair share.” That speaker was Ronald Reagan.
Today our country faces several problems–one of the biggest is a tax code that does not take in nearly enough to properly fund our numerous government programs. In addition, the current tax code racks up a multi-trillion dollar debt that no one believes is going down anytime soon. A recent report by nonpartisan research and advocacy group Citizens for Tax Justice dives further into one of the major factors of our ballooning national debt: large corporations who pay little or no federal corporate income tax. Their report, Corporate Taxpayers & Tax Dodgers 2008-2010 studies 280 of America’s largest and most profitable corporations and what they paid in taxes the past three years. The study found that while our federal tax code requires large corporations to pay a 35 percent corporate income tax, 280 of our country’s wealthiest companies pay, on average, only half that amount. My proposal is simple: streamline the tax code by eliminating corporate tax loopholes to start collecting more in tax money, all while making the tax code more fair for our great American companies.
The findings in the report are disheartening and at the very least eye opening. To start, 30 companies paid an effective corporate tax rate of less than zero percent. To put that into perspective, behemoth companies such as General Electric, Boeing, DuPont, Wells Fargo and Verizon pay fewer federal taxes than the 50 percent of Americans who pay no federal income tax whatsoever. These large corporations are just as responsible for our deficit as the millions of Americans who pay no federal income taxes, however, unlike lower income Americans who pay no income tax, these corporations are much more financially able to pay a fair tax rate that can make a substantial difference to the deficit than a bunch of low income Americans that are struggling to put food on the table even without income taxes.
Another important effect these corporate tax loopholes have on our economy is they disadvantage companies who do not benefit from the loopholes. Lobbyists argue that tax breaks will incentivize companies to make new investments to do useful activities that range from “research” for drilling oil and gas to building racecar tracks. The problem here is that other companies in the same industry do not get to enjoy the same perks as other companies. In a country that romanticizes the values of capitalism and the free market, the government should not dictate which investments companies should make. Ladies, why should Macy’s pay a three-year tax rate of 12.1 percent when Nordstrom’s paid a 37.1 percent rate over that same time? Technology Geeks, Hewlett-Packard paid a 3.7 three-year tax rate while Texas Instruments paid a 33.5 percent rate. Put the same tax rate on these two sets of companies and let consumer demand and the free market dictate success and let individual companies decide which investments they should make, not the federal government.
The problem with trying to implement meaningful corporate tax reform is that both sides of the political isle benefit immensely from corporate campaign donations. With the recent Citizens United v. FEC ruling that allows corporations to have the same rights as individuals, the amount of corporate influence and cash to keep these loopholes in-place is going to continue to be strong. However, I believe a bi-partisan agreement can and should be met. As stated earlier, the current corporate tax rate is 35 percent but the 280 corporations studied had a three-year tax rate of 18.5 percent. You can satisfy Republican demands to lower the corporate tax rate by lowering it to 25 percent. You can also satisfy Democratic desires for increased revenues because if everyone paid a 25 percent rate, the amount of corporate tax revenue would increase. This way you can increase tax revenues and reward companies who have paid higher taxes in the past with the ability to invest more in their companies, all while keeping everyone’s individual tax rate the same. To me, it is a political and economic win-win, and I haven’t met a single person to the left or right of me who thinks this is a bad idea. It is this type of discussion our country needs, and especially on this issue, meaningful reform can be made that can benefit both sides and most importantly, the American People. Our businesses are what help make this country great; they are the backbone of our economic superiority. However just as we expect individual taxes to be as fair as possible, we expect corporate taxes to be as well. Indeed, good ideas aren’t preceded by a D or an R.