America badly needs corporate tax reform.
The United States pretends to tax corporations heavily. But those heavy tax rates are perforated by randomly generous rules such that many tax-efficient firms pay nothing at all, or even receive money back from the U.S. Treasury. The result is heavy unfairness between industries and firms, an unfairness that many economists believe systematically distorts investment decisions. U.S. productivity growth has been sluggish since the Great Recession—and had actually turned negative by the beginning of 2016.
At the same time, the corporate share of the federal-tax burden has dwindled over the years and decades. More and more of the cost of government now falls upon the payroll tax, which weighs most heavily on low- and middle-income wage earners. These Americans are suffering stagnating incomes, very probably because of the poor productivity growth of the past half-decade.
Lowering the corporate rate while tightening collection—with a view to raising more revenue in a more rational way—has been a good government cause since the late 1980s. John Kerry campaigned on it during his presidential run, in 2004, as NBC News reported at the time:
“Some may be surprised to hear a Democrat calling for lower corporate tax rates,” Kerry told an audience at Wayne State University [in Michigan]. “The fact is, I don’t care about the old debates. I care about getting the job done and creating jobs here in the United States of America.”
Now, in 2017, the all-Republican federal government at last has a chance to make progress on this goal. And it is throwing that opportunity away.