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Let’s try to answer that: A Monday ago, Weekly Tax asked how American corporate tax rallies compare to major trading partners – given that the vast majority of companies here are not taxed as corporations.
And since then we have had quite a few answers.
First: The Treasury Department believes it “brings in less corporate tax revenue than its share of almost any advanced economy” and that corporate revenue has declined particularly sharply since Republicans passed the 2017 Tax Act, HR 1.
However, a new article on Bloomberg Tax by Kyle Pomerleau of the right-wing American Enterprise Institute and Donald Schneider of Cornerstone Macro argues that the first statistic doesn’t tell the full story.
Pomerleau and Schneider, who were also senior economists at House Ways and Means when the Republicans took control of Congress, found that U.S. corporate tax rates in the Organization for Economic Cooperation and Development countries were currently average, given America’s sizable transitory sector and other factors.
And what if President Joe Biden incorporated into law his entire series of corporate tax increases – including raising the corporate tax rate from 21 percent to 28 percent and levying a minimum tax on corporate book income?
This would push the US to leave only France, Belgium, and Switzerland behind on adjusted corporate tax rallies among advanced economies, according to Pomerleau and Schneider – although it’s worth noting that corporate revenues are not entirely based on the law before tax cuts and jobs pre-tax levels would be reduced.
And to be clear: Pomerleau and Schneider wrote that it’s not just the number of companies that pay taxes on their owners’ returns – more than nine in ten companies, according to IRS data – that needs to be taken into account when adjusting corporate tax revenues.
Another factor, for example, is that the United States has a lower corporate tax base due to a relatively high work share in business output. (In layman’s terms, employee pay is a fairly large percentage of the company’s output here.)
MORE ON THIS, but first – thank you for joining us again for Weekly Tax, where we hope to find the tax angle for this new soccer Super League.
We’re one day late, but who doesn’t like a little terror to start the week: Yesterday it was 34 years since a Phoenix skydiver named Gregory Robertson flew “like Superman” to parachute a woman drag who was knocked unconscious while jumping.
Somebody saves us and sends a couple of bullets.
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Manufacturers are poised to fuel the country’s economic recovery after the pandemic. However, a new study published by the National Association of Manufacturers finds that proposed tax increases would cost a million jobs in the first two years of implementation. If Congress pushes these tax hikes, job creation and manufacturing growth will be jeopardized. For more information, see nam.org/protectmfgjobs.
ALSO PONDERING VALUE: Data shows that a relatively small percentage of corporate profits in the US go to traditional corporations compared to other countries, but also that America is not a total outlier in this area.
As early as 2015, the OECD found that companies with a single tax (the equivalent of pass-throughs) have a higher taxable business income than companies in Austria and Germany, which is split in the middle in the USA
Yet other countries with robust non-corporate sectors generate much more corporate tax revenues than the US, as Tom Neubig, former deputy head of tax policy and statistics at the OECD, pointed out.
Corporate income tax revenue as a percentage of GDP was 2.1 percent in Germany – more than double the 1 percent in the US – in 2018, the first year the GOP tax law came into force.
Additionally, Neubig noted that collections were also higher in four other countries, where traditional corporations generate less than three-quarters of corporate profits, arguing that the U.S. certainly had the room to raise corporate taxes. (Those four countries would be Austria, Denmark, Italy, and New Zealand.)
TALKING OF WHICH: Trading horses via corporate tax hikes in the infrastructure package is far from over, but would you think this might actually be the easier part?
The Biden government is considering tax increases for high net worth individuals to pay for the second part of the infrastructure package, which will focus on issues like education and paid vacation, our Megan Cassella and Brian Faler reported.
Polls suggest that taxing the rich and corporate are both popular, but Democrats fear the first needle may be harder to thread than the second – while Republicans believe both will become unpopular once Biden’s ideas are better scrutinized.
Some of the complicating factors aren’t exactly new either – including the potential for lawmakers representing places like San Francisco (home of the Speaker of Parliament) and New York (home of the Senate majority leader) to believe voters care about Biden’s magic The figure of $ 400,000 a year is not particularly high for their areas.
And don’t forget SALT: there is now bipartisan pressure among blue state lawmakers to reset the $ 10,000 cap on state and local deductions from the tax law, which would largely benefit the rich.
Opportunities and Objectives: Senator John Cornyn (R-Texas) suggested that Republicans would be open to leaner, bipartisan infrastructure on Fox News Sunday, as noted by Wall Street Journal’s John McKinnon – while Senator Chris Coons (D- Del.) Said on the same show that it could allow Democrats to pass the controversial policies they are considering through a budget vote. Biden will meet with a non-partisan infrastructure group today.
And finally, Axios reported that the Democratic march is continuing to a potential 25 percent corporate rate – and not just because West Virginia Senator Joe Manchin wants it to be.
REVIEW OF OECD: Irish officials are publicly cautious about the Biden government’s efforts to work towards a global tax deal, including a potential minimum tax of 21 percent. (The general answer: concern about these proposals, along with saying that an agreement would be entirely positive.)
However, deeper concerns are emerging in and around Dublin over the status of the Irish corporate rate of 12.5 percent, as our Shawn Pogatchnik noted. “We have always said: we will never touch 12 points 5. But there is little point in dragging that line further in the sand when the OECD tide finally hits,” said a senior official.
Missing the mark: Soccer stars – or at least their lands – are among those trying to pay Argentina’s new wealth tax, Bloomberg reports. The heirs of Diego Maradona and Carlos Tevez are the latest to file injunctions against payment of the one-time tax that is said to apply to anyone with assets of $ 2.2 million or more – around 13,000 people in theory. But as of Friday, the deadline for payment, the tax has only raised about 6 billion pesos (about $ 65 million), or about 2 percent of the original estimate. Tevez’s filing, one of dozen of wealthy Argentines, calls into question the constitutionality of the tax. For his part, Maradona endorsed the tax before he died in November.
To the north: Colombia also wants to tax the rich, Bloomberg notes – to combat the consequences of the coronavirus, including budget deficits and increasing poverty. Among the proposals there: a wealth tax and a one-time fee on high salaries.
IT CANNOT PAST: Kansas Governor Laura Kelly continued her habit of vetoing GOP tax cuts on Friday, The Associated Press reports. The big question now is whether that veto will persist once lawmakers return to Topeka next month. The tax cut law was passed by the Senate with a veto-safe majority, but it had three votes too few in the house. Overall, this latest move would cut taxes by around $ 284 million over a three-year period by increasing the standard deduction for individuals and relieving the burden on individuals and businesses who pay more state taxes as a result of the 2017 Tax Act. Kelly, who has cited the budget problems caused by the tax cuts imposed on GOP tax cuts several times over the past two years under former Governor Sam Brownback, has said she would be willing to increase the standard deduction – if so the case would be coupled with a source of income such as the collection of state sales tax on digital streaming products. But the GOP leaders in the legislature are strongly against this idea.
The Justice Department is suing Roger Stone, longtime advisor to Donald Trump, for around $ 2 million in unpaid taxes.
Nina Olson, the former national taxpayers attorney, wondered where this new IRS estimate of the $ 1 trillion tax gap came from.
NYT Editor: “Tax evaders pay for Biden’s infrastructure plan.”
The National Association of Manufacturers worked with Rice University economists to study the proposed tax increases, including a corporate tax rate of 28%. The results are clear: the tax hikes would give other countries a clear advantage – 1 million fewer jobs in the first two years, reduced investment in American communities, and slow economic growth. After the 2017 tax reform, manufacturers kept their promises to raise wages and benefits, hire new workers, and invest in communities. It is time to build on that progress, not reset it. Manufacturers support President Biden’s focus on upgrading infrastructure, but this does not require destructive tax increases. The NAM Building to Win plan offers several options for better revenue streams. Let’s follow this game book and let’s protect American jobs so that together we can build the next world after the pandemic. For more information, see nam.org/protectmfgjobs and nam.org/buildingtowin.
Fair enough: the word parachute comes from French and means “protection from a fall”.