Prepping to talk about corporate tax reform on MSNBC at 2’ish, I stumbled on this ‘graf from this WSJ piece. I thought it was a tight summary of a basic fact of reform:
Companies with huge capital investments, such as manufacturers, care a lot about the terms of writing them off; companies in labor-intensive business don’t. Companies with big overseas profits focus heavily on how those earnings are taxed; primarily domestic companies don’t. Companies who get little advantage from all the existing credits, deductions and loopholes are ready to sacrifice them to bring down the corporate-tax rate; those who benefit, not surprisingly, aren’t.
I’ve often summarized the above by maintaining that your loophole is my treasured job creation program, but it’s actually basic arithmetic. Based on all kinds of factors, many of which are arbitrary (debt financing is heavily favored relative to equity financing; earnings abroad are protected relative to earnings here (!!)) some producers pay higher rates than others. So if we’re growing to bring down the overall rate, than those paying above the average will come down and those below will have to come up.
Those of you with an historical bent may be wondering how we pulled this off in the 1986 reform. There’s a lot to say about that but a simple summary is that lobbyists held less sway (yes, there was lots of money in politics, but not as bad as it is now), members were a bit more willing to disobey them, and there was much more working across the aisle.
What should corporate tax reform look like? Like this, IMHO.