When it comes to discussing corporate taxes and tariffs, the word "fair" is almost always at the center of the debate, yet it is often used to mean entirely different things. Tax advocates would argue that corporations (as well as wealthy individuals) need to "pay their fair share," and tend to highlight the unfairness of so-called corporate welfare programs. On the flip side, big business tirelessly seeks to compete fairly "on a level playing field," whether it's reducing barriers to markets or their tax rates, they simply want what the other guy gets.
In the case of corporate tax rates, one Washington-based group is arguing that it is completely unfair for U.S. corporations to pay 39% while the average for industrialized nations is only 25%.
"As of April 1, the United States achieved the dubious distinction of having the highest corporate tax rate in the world," says James Pinkerton, Vice Chairman of the RATE (Reforming America's Taxes Equitably) Coalition, a bi-partisan group that is backed by 27 of the country's biggest businesses, as well as elected officials from both parties. He says that at a time of weak economic growth and hiring, "it's crazy" that U.S. companies face this hurdle alone. In fact, he says, 10 years ago, one-third of the world's biggest companies were domiciled in the U.S., but today that number has slipped to about one-quarter, and Pinkerton says the outflow of American headquartered companies ''has a lot to do with an anti-competitive corporate tax rate."
Of course opponents, including President Obama, have argued that loopholes and other credits make the effective tax rate paid a whole lot lower than the statutory rate, and they also say the country can't afford it given our national debt and deficit.
But Pinkerton points out, contrary to conventional wisdom, corporate taxes account for less than 7% of total tax receipts, and that the ancillary effects of a stagnant hiring environment are far more costly.
That's part of the reason why Pinkerton thinks ''the time is right" for Congress to pass its first major reform of corporate taxes since 1986, pointing out the ''pressure is on politicians" due to the slow-growth quagmire we are currently stuck in.
The RATE Coalition is currently working to get its corporate tax cut plank added to both the Democrat and Republican convention platforms in August. Pinkerton says, given all the ideas and challenges being debated, "This is one positive thing we can do to help the economy and to get growth going again—and we ought to do it."