A new data presentation from Sen. Ron Wyden (D-Ore.) should make this even worse for Republicans. It vividly illustrates why the status quo on corporate taxation is so hard to defend: It shows how little we collect in corporate tax revenues as a percentage of the economy, how bad the future outlook is and how miserably this compares to other countries.
Right now, Politico reports, Republican senators are developing a game plan for the coming battle. A handful are working on an alternate infrastructure plan, which would spend far less than Biden’s and appears designed to entice Democrats into bipartisan negotiations.
Democrats are open to passing more than one bill: One could focus just on infrastructure Republicans support — roads, bridges, waterways — and theoretically get 10 GOP senators to overcome a filibuster. The second could include Democrats’ other priorities — renewable energy, research and development, caregiving for the elderly — and pass by simple-majority reconciliation.
If the first bill were around $800 billion or higher, this could work. But there are reasons to be highly skeptical.
First, NBC reports that even the few Republicans inclined to support such a thing can’t agree on the size of a smaller expenditure. What’s more, the rub is how this would be paid for.
Republicans adamantly oppose raising corporate tax rates to fund even this smaller bill, and instead want to rely on something like raising the gas tax, which Democrats oppose, because it’s regressive, whereas corporate tax hikes are progressive.
This is making Democrats wary that Republicans are laying a trap, Politico reports:
Some Democrats privately argue that they shouldn’t allow Republicans to throw their weight behind a popular infrastructure bill without requiring their engagement on the more divisive debate over how to pay for it.
In this scenario, centrist Republicans would associate themselves with a popular roads-and-bridges plan without conceding an inch on raising corporate tax rates to fund it. Then, when Democrats do raise them to pay for the rest of their plan, Republicans would pocket the popular infrastructure items then immediately blast Democrats as tax hikers.
That’s not something Democrats should let Republicans get away with. Which is where Wyden’s new presentation comes in.
‘Republicans decimated corporate tax receipts’
The data from Wyden, the chairman of the Senate Finance Committee, places the corporate tax status quo in a larger context. This status quo, importantly, was created in part by the 2017 GOP tax cut, so it shows what Republicans want to maintain, and what Democrats want to change.
Relying on information from the Congressional Budget Office, Wyden’s staff calculates the following:
- From 2000 to 2016, corporate tax receipts averaged around 1.7 percent of total gross domestic product (which Wyden’s office calls the “modern average”).
- Immediately after GOP passage of the 2017 tax bill, corporate tax revenues as a percentage of GDP dropped nearly 40 percent below that modern average.
- This will persist in coming years: Corporate tax revenues as a percentage of GDP will be more than 25 percent less than that modern average for the next decade.
- In 2018, the first year after the GOP tax cuts passed, the United States was last in corporate tax revenues as a share of GDP of all countries in the Organization for Economic Cooperation and Development.
That’s a striking indictment of the status quo, notes Steve Rosenthal, a senior fellow at the nonpartisan Tax Policy Center, who says his own calculations roughly confirm Wyden’s.
“In 2017, Republicans slashed corporate tax rates, which decimated corporate tax receipts,” Rosenthal told me. “U.S. corporations avail themselves of the benefits of the U.S. economy — infrastructure, workforce and the like — but contribute very little to it.”
“Historically, corporations that enjoyed the benefits of the U.S. economy contributed substantially more,” Rosenthal continued. “In recent years, these contributions plummeted, which in my judgment is simply unfair. Corporations and their shareholders can afford to contribute more.”
It’s also very hard to defend politically. Remember, Biden’s plan would raise the corporate tax rate from 21 percent to 28 percent, halfway back to the 35 percent where it was before the 2017 GOP tax cut. So Democrats would only partly undo the status quo so vividly depicted above.
“Republicans’ red line on corporate revenue is completely unreasonable," Wyden told us in a statement. “Corporations have never contributed less to federal revenues than they do now — thanks to Republicans’ tax giveaway.”
What’s more, the Biden plan wouldn’t just raise corporate tax rates. Such a hike would likely fall to some extent on corporate profits generated by market power, or monopoly rents. Democrats would also try to close loopholes that enable multinational corporations to reduce tax bills with international profit-shifting trickery.
Shouldn’t the new working-class GOP we keep hearing about, particularly those Republicans who preen around on Fox News as populist scourges of woke, elite, globalist corporate domination, support such measures?
As it is, polls show that raising corporate tax rates has broad public support, both generally and in its specifics. If Democrats can press this case about the indefensibility of the status quo, the Republican position should get even harder to sustain.