TIMOTHY NOAH SEPTEMBER 19, 2011
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Obama wants to lower corporate tax rates in exchange for eliminating various loopholes. "Because our corporate tax system is so riddled with special interest loopholes," a White House budget office document states, "our system has one of the highest statutory tax rates among developed countries to generate about the same amount of corporate tax revenue as our developed country partners as a share of our economy; this, in turn, hurts our competitiveness in the world economy." Rep. Paul Ryan (R., Wisc.), the conservative golden boy of the moment, says the same thing in this video. Yet Ryan had nothing favorable to say today about Obama's proposal on corporate taxes. Neither did House Speaker John Boehner (R. Ohio). Neither did Senate Republican leader Mitch McConnell (R., Ky.) Instead, all three bellyached about how Obama's other proposal, the one to require millionaires to pay the same rate on their income taxes as middle-income families, would hurt "job creators."
Why couldn't McConnell, Boehner, and Ryan take half a minute to say that there was one part of the president's plan that they agreed with? Mainly for partisan reasons, of course. But also, I think, because Republicans don't actually care as much about the corporate tax as they'd like you to think. What they care about are personal tax rates, because that's what the business lobbyists they answer to care about, because that's what the corporate chief executive officers who the business lobbyists answer to care about. Who gives a damn how much my corporation pays in taxes so long as I get to keep my bonuses and my stock options? Another reason to be indifferent is that the top corporate tax rate has been dropping steadily since1969, when it peaked at 52.8 percent. Today it's 35 percent, which also happens to be the top personal income-tax rate.
Given the GOP's indifference, I think Obama ought to eliminate corporate tax deductions while maintaining the 35 percent top corporate rate. It's not that I have any strong feelings about what the corporate rates should be. I'd be happy to see the corporate income tax eliminated entirely, provided the revenue could be made up through higher personal income taxes on the wealthy. God knows I don't want to hurt America's competitive position.
I don't care what the corporate income tax rate is because I don't think corporations are people. Unfortunately, the Supreme Court happens to disagree. In last year's Citizens United ruling it found that corporations are people who enjoy the same First Amendment right you and I do to spend unlimited quantities of cash on "electioneering communications." How can corporations be people when it comes to the First Amendment and not people when it comes to the Sixteenth? They can't. Obama should therefore state that much as he would like to lower the corporate tax rate to improve the U.S. competitive position with respect to other advanced industrial nations, he is hemmed in by the Supreme Court. He cannot make the top corporate rate any different from the top personal rate until the Supreme Court reverses its Citizens United ruling. In the meantime, he'll maintain the top rate at 35 percent and raise it to 39.6 percent when the Bush tax cuts expire. As with families, he will impose this top marginal rate only on corporations that earn in excess of $250,000 a year. That's not very much for a corporation, but Citizens United is the law of the land. His hands are tied.
11 comments
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- IggyPop
September 19, 2011 at 7:13pm
This may be good policy, but it's stupid as a matter of law, and thus of politics. Corporations are persons under significant swaths of the law, including, according to the Supreme Court, the First Amendment free speech protection, but that in no way means that their tax status must be the same as natural persons.
- TARFON
September 19, 2011 at 7:17pm
It's quite simple: Corporations have all the rights and none of the responsibilities of persons.
- krlong014
September 19, 2011 at 7:39pm
"He cannot make the top corporate rate any different from the top personal rate until the Supreme Court reverses its Citizens United ruling. " I only wish he had that much power. Right now, on the news, the criticism of President Obama is that he was careless for even suggesting tax hikes, because everyone knows the Republicans won't go for it. That sounds like a weak president. He better fix that. By the way, I say fix the corporate tax by permitting a deduction dividends for publicly traded corporations, with withholding, and get rid of the 15% lower tax on capital gains and dividends.
- Nusholtz
September 19, 2011 at 7:50pm
Luckily my glass of iced tea was sitting on a coaster when I clicked on your link Iggy. Thanks for making my day.
- tmmats
September 19, 2011 at 7:51pm
Yeah, great link Iggy. But I lke Noah's reasoning here. It does appear flawless, whether politically expedient or not. I am mystified how an entity can be defined as a person under particular swaths of the law, but not others. I'm no lawyer - which is surely why I'm so confused here - but if the concept of personhood can be applied here in there in an arbitrary way, depending on how we happen to feel about it today, and is not defined as meaning some uniform set of qualities or characteristics when applied to any entity said to possess it, what can it actually mean?
- Haole45
September 19, 2011 at 8:22pm
Beautiful! (In the Koch voice, of course.) I have been thinking this for several days now. If only we could wheedle more posts out of you, Mr. Noah . . .
- chaitless
September 19, 2011 at 8:45pm
I am definitely with you, c. More posts!
- liberalref
September 19, 2011 at 9:22pm
My problem with closing loopholes in exchange for lowering the Corporate tax rate (a beltway meme) is the people who lobbied for the loopholes in the first place are not going to turn off the lights and go home. We'll just start with new loopholes in the next budget cycle working off a new and improved lower rate. Regrettably, it's the way our system works. Own the gamesmanship and either keep the rates or climate them altogether. Is putting a VAT on corporations a possibility, or would that harm corporations that were not integrated?
- NCblue
September 19, 2011 at 9:56pm
I would eliminate the corporate income tax entirely - this would go a long way to defanging llobbyists by taking away one of the things - tax breaks - they most frequently lobby for. Make up the revenue on the personal income tax, and make that ironclad by eliminating any kind of deductions against earned income after the first $200K or so.
- IowaBeauty
September 19, 2011 at 10:53pm
This is a pretty clever post in terms of the political suggestion, but it demonstrates an appalling ignorance of the case law history of this important question. Citizens United indeed. It is to laugh. The Supremes first found for corporate personhood in 1818 (Dartmouth College v Woodward). In 1830 Chief Justice Marshall said, "The great object of an incorporation is to bestow the character and properties of individuality on a collective and changing body of men." In the 1886 case Santa Clara v Southern Pacific the Court ruled that the Fourteenth Amendment equal protection clause guarantees constitutional protections to corporations as well as natural persons. See also the 1906 decision in Northwestern Life Ins Co v Riggs. Like it or not, corporate personhood is VERY established law.
- Robert Powell
September 21, 2011 at 8:37am