![]() This includes, but is not limited to, incentives to hire disadvantaged workers, invest in distressed communities such as the Low Income Housing Tax Credit, bring jobs home from overseas, help small businesses and promote clean energy and energy efficiency.įurther, we must eliminate tax loopholes that encourage reckless and undesirable behavior such as the overuse of debt financing and tax sheltering, and explore commonsense revenue streams like putting a price on carbon pollution or enacting a small financial transactions tax to reduce market volatility. Comprehensive corporate tax reform should retain those expenditures that have proven to be an efficient and worthwhile investment in our nation’s future. ![]() In addition to being a means through which the private sector contributes to public goods and societal needs, the corporate tax code is meant to serve as a tool to fuel smart investments, and an economic instrument to incent clear, positive objectives. However, the presumption that we should turn around and shovel this revenue out the door through lower marginal rates – particularly when we have huge needs for investment in areas such as infrastructure and education – is simply one we cannot afford.Ģ. How do we improve? We should advance the tax code’s efficiency, eliminate wasteful loopholes, broaden the base, and reduce bias towards overseas investments. This is not a fair distribution of our tax burden. As a share of our total revenues, corporate taxes averaged 27.6% in the 1950s and have dropped precipitously since to 10.4% from 2000-2009. Just this year, CBO data show that the effective corporate tax rate dropped to 12.1%, the lowest recorded level during the past 40 years. Treasury found that when evaluated on average corporate tax rates, the United States was second lowest among its competitors in the G8 and three percentage points below the Organization for Economic Cooperation and Development (OECD) nations’ average. As a share of GDP, corporate taxes have fallen from 4.7% in the 1950s to a scant 1.9% from 2000-2009. Plain and simple, the corporate contribution to our deficit reduction must increase from the status quo. This asks nothing of corporations that continue to set near-record level profits and have largely recovered from our post-2008 economic slide, and requires the sacrifice of working families and the poor to be more severe. We believe that any comprehensive tax reform must include the following six principles.Īs the debate over our fiscal challenges proceeds, more and more constituencies have been asked to contribute to taming our deficit under the pretense of “shared sacrifice.” Yet time and time again, the corporate tax code has been given a pass. ![]() Further, so-called “dynamic scoring,” that imagines revenue out of thin air and is widely refuted by respected economists of all political affiliations, cannot be used to shirk the requirement for revenue in deficit reduction proposals. The writing is on the wall: a revenue-neutral approach to tax reform – on either the corporate or individual side of the tax code – is not an option. However, with demographic shifts, the desperate need for job-creating investments, and the size of our current deficits, our revenue will need to be higher than even these historical levels to achieve balance. During these years of balance, federal revenue averaged 19.5% of GDP, substantially higher than the previous 40 year average (18% of GDP) and the pre-recession level (18.5% of GDP). Rather than use the 1986 tax reform as a model, we should be taking cues from our last five balanced budgets (19-2001), which all required above average revenue. Progressive tax reform is the only way that wealthy Americans can share significantly in that sacrifice. Low- and moderate-income Americans are already contributing to deficit reduction through the Budget Control Act spending caps and are likely to be asked to sacrifice more. The primary goals of comprehensive tax reform should be to progressively raise sufficient revenue to (1) make investments that will grow the economy, and (2) set us on a path for long-term deficit reduction. Tax reform must be done in a way that raises significant revenue, protects working families and the vulnerable, and requires corporations and the wealthy to pay a fair share. We cannot afford to extend tax breaks for corporations or the wealthy that cripple our ability to invest in areas that expand economic growth, like infrastructure and education.
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