The United States has the highest corporate tax rate on the planet. According to data from KPMG, a global consultancy, the US corporate tax rate for 2013 is 40 percent. The average global rate for 2013 is less than 25 percent.
This difference in tax rates has a significant impact on the US economy and on its residents and citizens. You might ask why this is the case. This is where our faulty education system allows our political leaders to treat us as idiots (according to word derivations the term idiot is derived from the Greek language and denotes someone being ignorant of civic matters). This is true because corporations can locate manufacturing, selling, and distribution facilities wherever they can best afford. In selecting places in which to operate a corporation will consider matters such as real estate value, supply chain proximity, wage rates, an educated labor force,and overhead costs. Among the overhead costs considered will be the corporate income tax. Since our tax rate is more than one-third higher than most developed countries, we are at a huge competitive disadvantage. This is why many US corporations have sent jobs overseas for the past 30 years or so. Unless things change, the situation will only get worse. My main question here is why our schools do not make this clear to students in our high schools and universities.
There are some people who think we ought to tax corporations heavily. Some of these people are totally oblivious to the reality that, economically speaking, corporations do not pay taxes. Why is this? It is because income taxes are a cost of doing business and are, therefore, passed on to buyers in the purchase price. The higher the rate of taxes the more US consumers pay for products produced by corporations. This reality was clearly illustrated when the US government eliminated the depletion allowance for large integrated oil companies. As soon as that elimination became law, the price of oil and gas at the pump increased by an amount roughly equal to the tax benefit of the lost depletion allowance. By having a high rate of corporate income tax we are essentially sticking it to ourselves. Why would we do that? Because we do not know any better. This is one case where I believe our governor has it right. We must reduce corporate income taxation to level out the playing field so we can keep more jobs of all skill levels in the United States.
So, why do our elected leaders not push for lower corporate taxes. The answer is simple. Corporations do not vote. Our shameless political leaders believe, and they are probably right in many cases, that we are a nation of fools who do not understand that by increasing corporate taxes Congress is indirectly increasing taxes on individuals. As corporate profits go up, consumer prices go up in lockstep. How is this any different from increasing taxes on individuals? Of course the flip side is that if corporate taxes go down, the US work force might actually increase and payroll and individual taxes would go up. Who could be opposed to this? No one should be, the gutless wonders in the District of Columbia care about nothing other than being re-elected. Increasing corporate taxes plays well with an undereducated electorate. Moreover, they can blame the job losses on greedy corporations who, again, do not vote.
What can we do? Writing letters will not help. It almost never does. The only thing that will help will be kicking out the career politicians at every election and demanding more and better leadership from the new people. Once they are elected, we should make sure that they know we are watching them and will actually show up and vote at every opportunity. We should also demand state conventions to change our constitution so there will be term limits on all political offices. The day of careers in elected office should end; the sooner the better.
We should supplement political action with changes in high school curricula so that the next generation of adults will have the political savvy, knowledge and, hopefully, the will to manage their elected officials and not just letting incumbents win from year to year. We should bring back civics classes as well as classes dealing with basic principles of income taxation.