The Minimum Corporate Tax Should Be At Least 25%

The chart above shows what has happened to income taxes because of Republican policies. Those policies favor the rich and corporations to the detriment of all other Americans. Corporate taxes are at an all-time low (and many profitable corporations pay no tax at all), while worker wages has risen as a share of the national income. This has resulted in a huge (and still growing) gap in income and wealth between the rich and the rest of America. This must be fixed, and the taxes on corporations must be raised.

The following is an op-ed in The New York Times by Gabriel Zucman and Gus Wezerek:

In the decades after World War II, close to 50 percent of American companies’ earnings went to state and federal taxes. Economically, it was a golden period. Middle-class incomes grew at roughly the same rate as those of the richest Americans.

But as globalization gave companies the ability to choose where they recorded profits, Congress scrambled to keep their business by lowering corporate taxes. In 2018, American companies were taxed at an average effective rate of less than 14 percent, by our calculations.

Corporate tax breaks have helped business owners amass inconceivable amounts of money over the past few decades. Meanwhile, middle-class Americans have footed the bill, as Congress has propped up the budget by raising taxes on wages.

President Biden should be applauded for trying to end the race to the bottom on corporate tax rates. But even if Congress approves the 15 percent global minimum corporate tax, it won’t be enough to close the growing economic gap between America’s rich and middle class. Taxing multinationals at 15 percent would still leave them facing a lower rate than the average American pays in state and federal income tax.

For the Biden administration to give working families a real leg up, it should push Congress to enact a 25 percent minimum tax, which would bring in about $200 billion in additional revenue each year. Over 10 years, that money would be more than enough to pay for nationwide high-speed internet, free community college and universal preschool for 3- and 4-year-olds.

There’s little chance that Republicans will support a 25 percent floor. But they already had their shot at reining in tax evasion with the 2017 Tax Cut and Jobs Act, and they failed. New data from the Bureau of Economic Analysis suggests profits booked in foreign tax havens have not declined since the law was passed. In 2018, U.S. corporations reported more profit in Ireland than in Mexico, China, Germany and France combined.

Companies have resorted to devious schemes to justify their profit shifting. For years, the rights to Nike’s Swoosh trademark belonged to one of the company’s Bermuda subsidiaries. In its quest to avoid taxes, Apple moved some of its intellectual property to Jersey, a small island in the English Channel.

Put another way: In 2018, Facebook made $15 billion in profit in Ireland — the equivalent of about $10 million for each of its employees there. That same year, Bristol Myers Squibb recorded close to $5 billion in profit in the Emerald Isle, or roughly $7.5 million per employee.

This is tax evasion, plain and simple. When a company logs billions of dollars in profit in a shell company, it violates the spirit of the Internal Revenue Code’s economic substance doctrine, which states that a transaction must have a purpose other than to reduce tax liability.

But multinational companies get away with it by spending billions of dollars on top-tier lawyers and former lawmakers. Hobbled by budget cuts, the Internal Revenue Service has struggled to audit them.

The time for incrementalism is long past. For decades, Congress has been playing catch-up as business owners and a handful of tax havens have driven international tax policy. The result has been a nation where working-class Americans are left with underfundedpublic schools and hospitals as the wealthy board rocketships to outer space.

With a 25 percent minimum corporate tax, the Biden administration would begin to reverse decades of growing inequality. And it would encourage other countries to do the same, replacing a race to the bottom with a sprint to the top.