As you know, Burger King will move its headquarters to Canada with its purchase of Tim Hortons, thus evading America’s supposedly onerous corporate tax rates. The talking point here is that the effective federal, state and local tax rate in the United States is 40 percent, highest in the OECD, vs. Canada’s 26 percent.
A few points:
1. Like the tax-evading Internet companies (you know who you are), Burger King has benefited mightily from the commons. Its low-paid employees’ health care and other social services costs are off-loaded to the American taxpayers. Freeways, roads and infrastructure, paid by taxes, have been essential to the chain’s growth, especially in the sprawly suburbs.
2. Burger King is not only stiffing American companies that do pay their taxes. It is also sticking it to its franchisees, who own the vast majority of its stores and will continue to pay state and local taxes. The tax savings will go to executive compensation and shareholders, furthering income inequality.
3. One doesn’t have to flee the country to achieve perfectly legal tax avoidance. Sure, smaller companies pay full boat. Larger ones have elaborate methods to pay much less. According to the Government Accountability Office, large corporations paid an effective federal tax rate of 12.6 percent in 2010, not the nominal 35 percent, while 10 percent paid no federal taxes.
Thus, the chart below from the Tax Policy Center shows how corporate taxes as a share of GDP have fallen. This is one reason why we have deficits and “can’t afford” everything from modern infrastructure and “entitlements” (earned benefits) to replacing our aging Navy submarines:
4. But hasn’t the tax burden hurt corporate profits? You decide:
5. But don’t lower corporate taxes encourage hiring? According to tax expert Linda Beale, the answer is a “resounding no.” Another new study shows that the corporate tax code isn’t hurting competition, either — the opposite may be the case.
So when you think about “takers” and “deadbeats,” think about this whopper of a kick in the face to America.
Thursday Reading: One big reason it feels as if the recession never ended | Washington Post
Today’s Econ Haiku:
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