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Policy Brief 11-16
US Tax Discrimination Against Large Corporations Should Be Discarded
by Gary Clyde Hufbauer, Peterson Institute for International Economics
and Martin Vieiro, Peterson Institute for International Economics
October 2011
Public opinion holds that large corporations should pay a higher statutory tax rate than other business firms, and enjoy fewer deductions in computing their taxable income. Americans and their representatives in Congress have long entertained the notion that a corporate check paid to the US Treasury means "somebody else" pays the tax, conveniently forgetting that the money has to come from someplace. As the law is now written, the largest corporations (those with assets of $2.5 billion or more) pay about three-fourths of US corporate income taxes, even though they account for just 57 percent of corporate net income. Discriminatory tax burdens on one group of firms drive scarce capital and entrepreneurial energy to less productive firms, penalizing the entire economy. If the targets of discrimination are the nation's largest firms (the norm in the United States) the country will find it harder to compete on a global scale in industries that require dedicated research for decades, industries that exhibit huge scale economies, and industries that network across national borders. Whatever the relative contribution of large and small companies to gross or net job growth, the bottom line for American workers—and the American economy as a whole—is that it is important to ensure that the United States remains a favorable location for US-based multinational corporations to do business.
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RELATED INTERVIEWS
RELATED LINKS
Policy Brief 11-2: Corporate Tax Reform for a New Century April 2011
Policy Brief 10-10: Higher Taxes on Multinationals Would Hurt US Workers and Exports May 2010
Congressional Testimony: Tax Reform and the Tax Treatment of Debt and Equity July 13, 2011
Op-ed: America Badly Needs a Value Added Tax April 21, 2005
Paper: Tax Policy in a Global Economy Revised February 2000