Letter to the Editor: Tax lies

To the Editor:

Democracy becomes imperiled when politicians lie in order to gain support from citizens who expect their leaders to honestly explain and justify their policies. Sadly, the President and Republicans have shamefully distorted the facts in their attempts to win support for their tax proposals that will benefit corporations and the wealthy at the expense of ordinary working Americans.

To take one key example, the President repeatedly has claimed that corporations pay the highest tax rate in the industrialized world. Although the top US federal rate is 35 percent, given the corporations’ loopholes and exemptions, they seldom pay that rate. A study of 280 of the largest corporations from 2008-10 found that they had pretax profits of $1.4 trillion. These corporations actually paid an average tax rate of 13 to 15 percent. When we include state tax rates along with the federal rates, the nominal corporation rate rises to 39 percent.  But again, a 2016 report by the Treasury Department and the Obama White House found that the actual average rate paid was 18.1 percent. Compared to the other highly industrialized democracies that - along with us - compose the G7 Forum (Britain, Canada, France, Germany, Italy, and Japan), our rate is below the average of 19.4 percent paid by the other nations. Japan had the highest rate at 24.5 percent. Germany paid 21.2 percent, and Britain paid 19.0 percent. Only Canada’s and Italy’s corporations paid less than the US.

Republicans argue that cutting the corporate tax rate to 20 percent will cause a great increase in investment and wages. The only problem with this claim is that history and economics show that it is not true. The United Kingdom incrementally cut its corporate rate from 30 percent to 19 percent over a number of years, but the median wage declined. The US also cut the corporations’ rate in the 1980’s, and there was no surge in the economy. The University of Chicago asked 42 economists from diverse political backgrounds what the likely impact of the Republican tax plans would be on the economy and only one thought they would lead to substantial economic growth. The people who will benefit from a corporation tax cut will be the investors and senior executives.

The corporate tax rate cut is only one piece of the still developing tax plans - other parts may include eliminating the estate tax, changing the tax brackets, eliminating state and local tax deductions, and repealing the individual health care mandate - but two things are certain:  1) corporations and the wealthy will benefit the most, and 2) the cuts will add about $1.5 trillion to the national debt.  And later, when Republicans “discover” the ballooning debt and suddenly remember their “fiscal conservatism” once again, they will come after Medicare and Social Security.             

Thomas W. Hill,


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