Bob McDonnell Endorses Secretaries Paying Higher Tax Rates Than Their Millionaire Employers

Tax Fairness (0.00 / 0)

Several responses need to be made about this so-called double taxation argument for corporations, dividends, and capital gains.  First, corporate tax rates are far lower than Republicans like Bob McDonnell would want us to believe.  In fact, corporate taxes paid as a share of the economy are at their lowest level in the United States since WWII, aided by various tax loopholes especially ones enacted during the George W. Bush administration.  Corporations are also aided by offshore tax sheltering schemes devised by major accounting firms.  In the 1950s, American corporations shouldered about a quarter of federal budget outlays.  By 2003, that amount had been whittled to about 6 percent.  Real tax rates for the largest corporations are effectively about 17 percent on average but many corporations, like General Electric, have paid zero taxes or even received tax subsidies.

Second, the argument is also bogus that unearned income from capital gains and dividends are "special money" needing no further taxation.  Some Republicans argue that to grow the economy this special money should be free of taxes to encourage further investment and economic growth.  That might be true if the corporations choose to keep their profits and reinvest them in the company.  But once dividends are paid, the recipient is free to use the money to buy new homes, furniture, cars, and other consumable goods indistinguishable from ordinary salaried income subject to higher tax rates.  The same is true of capital gains from the sale of investments.  Yes, it might get reinvested, but ordinary earned income might also get invested.  In fact, all the money invested in IRAs and 401(k) plans by Americans saving for retirement, though tax deferred, are subject to taxes as ordinary income once it is withdrawn, including all the capital gains and dividends that may have accrued.

Finally, it should be noted how much American corporations benefit from doing business in the United States and how much they benefit from government's investments in our nation's infrastructure.  They have a continuous supply of well trained labor that has been educated from preschool through graduate school, paid for largely by government investments.  They operate under the security umbrella of the United States armed forces, our State Department, and local police forces.  They benefit from a court system to adjudicate their disputes and enforce their patents, copyrights, and contracts.  For all these things and more, corporations and their investors should be paying taxes to ensure their continued prosperity.

---

by: rexsimmons @ Sat Jan 28, 2012 at 01:40:50 AM UTC