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Corporate Tax Reform Will Be Painful for Whatever Is Left of the Middle Class

Clint Stretch, tax principal at Deloitte Tax, LLP

Update: David Dayen has the announcement that the Obama Administration will propose lowering the corporate tax rate to 28 percent.

The Hill has a story about negotiations between President Obama and the Republicans over corporate taxation. Vicki Needham reports that she has been told that the big questions are what business wants and how much taxes on individuals will be increased:

The problems in moving forward are large — first, the business community must agree to what it wants and, while there is general agreement that the corporate tax rate should drop to somewhere between 25 and 28 percent, lowering the rate would shift pressure — and probably mean a tax increase — to make up the difference in lost revenues to the individual side of the tax code.

There are difficulties in reaching an agreement acceptable to our Oligarchy because their demands are contradictory. They want a lower tax rate, but they don’t want to surrender their bought and paid for tax breaks. They certainly don’t want to pay more personal income taxes. What’s a politician to do? The only solution is to cut rates and leave tax breaks in the code. Then we screw the middle class, or whatever is left of it.

I’m guessing there can be agreement between the Oligarchy and their government lapdogs that we should cut Medicare and Social Security. After all, these are mere “entitlements” in the minds of both the President, the bulk of the Democratic Senators and Representatives, and the entire Republican Party, except the old people who depend on these “entitlements” and think they are Republican anyway. It’s almost like the elites forgot that we bought and paid for those “entitlements”.

Another good bet would be a Value Added Tax, a national sales tax. Sure, it’s a tax that really whacks the poor and the middle class, but what the heck, that means they have skin in the game. Maybe they could make up for their lost skin by selling a kidney. A VAT would reduce consumption; in fact that’s its goal. With lower consumption in the short run, we can keep the Lesser Depression going, so we will have to have more tax cuts for the rich. And, of course, with lower US demand, the Oligarchy will have to move more jobs overseas.

I particularly like the way the article finds an expert, one Clint Stretch, managing principal of tax Policy at Deloitte Tax, a full service guy, available to media to explain everything from the point of view of the wealth defense industry. And, like all servants of the oligarchy, Stretch is happy to call for pain for others:

“We have been cutting taxes for decades while not cutting entitlements. There is no possibility we can just grow our way out of the long-term deficit. We’re going to have to make some painful decisions.”

I don’t see any actual data in the Hill article, even from Mr. Stretch. Let’s try to help Needham, who has to rely on people like Mr. Stretch, and apparently lacks the ability to use the google to find groups like the Tax Justice Network or even look up facts for herself.

This graph shows the percentage contribution to total federal revenues of various taxes since 1950. It shows that corporate income taxes and excise taxes have declined, and the difference has been made up by increases in payroll taxes. The real boom in payroll taxes begins with Saint Reagan, thanks to Alan Greenspan.

Source: 2012 US Budget, Historical Tables, Table 2.1

Here’s a chart from Kevin Drum showing federal corporate income taxes as a percentage of pre-tax corporate profits.

Federal corporate tax as a percentage of pre-tax corporate profits

Compare that with the drumbeat from the US Chamber of Commerce about the terribly high taxation of corporations, a claim repeated by Needham.

If Needham were a real reporter, she might ask this question: Why should corporate taxes be low? Well, the 1% owns 38.3% of all stock (data from 2007). Increasing taxes on corporations results in an increase on taxes on the 1%. We can’t have that in our wonderful oligarchy, unless they agree. Maybe if we ask nicely?

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