Another Corporate Whiner

The person pictured on the left is Harold Hamm. He is the CEO of Continental Resources, and his oil company has earned $1.8 billion in profits in the last five years. A few days ago, he testified at a congressional hearing. He wants Congress to continue to give his company subsidies, in spite of the huge profits his company has shown.

In addition, he whined to Congress that his company is be forced to pay too much in taxes. He actually said, "Continental's effective tax rate is 38%". Now that is in the Congressional Record, and I'm sure many Republicans will be quoting Hamm as they talk about how the poor corporations are being forced to pay high taxes and need a big tax cut.

The problem with that is simply that it is not true. An "effective" tax rate is not the rate in the books, but the rate a company actually pays -- and Continental doesn't pay anywhere near 38%. They don't even pay a double digit tax rate.

In the last five years, Continental paid a tax rate of 1.9% in 2007, 2.6% in 2008, 0.1% in 2009, 3.2% in 2010, and 1.9% in 2011. That means for the last five years the company paid an average tax rate of 2.2%. I'll bet most (or all) middle class workers would think they had died and gone to heaven if they could pay that small a tax rate -- and yet, this company whines before Congress that it is paying too much. Talk about greed!

And it shouldn't surprise us that Hamm is Willard Mitt Romney's chief energy advisor. Hamm has to love Willard's plan to give corporations and rich people massive new tax cuts (while raising taxes on workers and cutting social programs for Americans hurting from the Republican recession).

And now a new study has been released which makes Romney's tax cut for the rich proposal (and Hamm's display of mendacity before Congress) sound pretty lame. The study was done by Owen M. Zidar (a former staff economist on President Obama's Council of Economic Advisors and a grad student at the University of California at Berkley). He studied economic growth in states with the largest number of high income individuals, figuring "states with a large share of high income taxpayers should grow faster following a tax cut for high income earners".

But what he found did not support that theory. A tax cut for low income people was much more effective in boosting the economy than a tax cut for high income earners. Here is how Think Progress put it:

“Almost all of the stimulative effect of tax cuts,” Zidar found, “results from tax cuts for the bottom 90%. A one percent of GDP tax cut for the bottom 90% results in 2.7 percentage points of GDP growth over a two-year period. The corresponding estimate for the top 10% is 0.13 percentage points and is insignificant statistically.”

This doesn't come as any surprise. Economic growth and job creation is not spurred by giving rich people more money. They already have enough money to buy whatever they want, and the extra money just sits in their bank account. Economic growth and job creation is spurred only by an increase in demand, and the easiest way to create demand is to funnel more money to low income people -- because they have to spend that money, and it circulates through the economy helping everyone and contributing to a healthy and growing economy.

Don't believe the corporate whiners wanting new tax cuts, or the Republican politicians wanting to give them massive new tax cuts. That will not help the economy or create new jobs. In fact, that is the same old "trickle-down" policy that cratered the economy in the first place. It didn't work for George Bush, and it won't work for Willard Romney.