Corporations, their lobbyists and most of the media complain that the statutory corporate tax rate is 35 percent and among the highest in the developed world. But studies (Institute on Taxation and Economic Policy) demonstrate the effective tax rate – the percentage of profits that corporations actually pay in taxes – is about one-half of that because of the various tax loopholes corporations enjoy. In other words, the U.S. corporate taxes paid are not among the highest in the developed world.
The U.S. needs corporate tax reform that lowers the statutory rate but increases the effective tax rate as found in other developed nations. One way to do that would be to repeal the rule allowing U.S. corporations to indefinitely defer U.S. taxes on their foreign profits so that there is no incentive to shift profits to offshore tax havens.
Reducing tax breaks for stock options and accelerated depreciation would increase corporate tax revenues and create a more level playing field between the large corporations and small businesses. The share of federal tax revenue coming from corporations has declined significantly since the 1950s, ’60s, and ’70s.