By Steven Pressman
While corporations have become a bigger part of our economy, and partnerships and individually owned firms have shrunk as part of our economy, corporate tax receipts have fallen as a share of GDP over the past half century.
Roughly, the corporate income tax has fallen from 4%+ of GDP in the 1950s and 1960s (the best days for the US economy) to 2% more recently. Reducing the corporate tax burden does not seem to have had any big economic benefits. And the consensus among public finance economists is that the burden of the tax falls on shareholders (rather than being passed to consumers or workers). Yes, most of are shareholders to some extent because of our pensions or small stock holdings, but shares of stock are held disproportionately by the very wealthy.
So, increasing corporate taxes or cutting their ability to dodge taxes should hurt neither average Americans or the economy. And to the extent that they prevent cuts in Social Security, Medicare, Medicaid, unemployment insurance, and other programs, this will be a net economic plus. And the nearly 2% cut in corporate tax payments is around $300 billion per year that can go to either deficit reduction, tax breaks for low-income and middle-income households, or to develop important programs that exist in all other developed countries except for the U.S. (for example, paid parental leave).
A corporate tax fairness bill addressing some of these issues was introduced in the U.S. Senate last week by Bernie Sanders of Vermont and in the House by Jan Schakowsky of Illinois. In a reasonable world, it should receive enormous support and would get passed easily.
Alas, we do not live in that world. We live in a world where death and taxes are inevitable because tax reform and gun control legislation can never get passed. Still, it is worth pressing for this legislation.
Steven Pressman is Professor of Economics and Finance at Monmouth University in Long Branch, NJ, USA. He is a trustee of the Association for Social Economics and a member of the editorial board of Forum for Social Economics, as well as the North American editor of Review of Political Economy and associate editor/book review Editor of Eastern Economic Journal. He is author/editor of more than a dozen books, including Fifty Major Economists, 3rd ed. (Routledge, forthcoming in 2013), and can be found on Facebook and Twitter.