Yesterday, Sen. Pat Toomey (R-PA) held a town hall meeting in Coudersport, Pennsylvania and was confronted about corporate tax dodging and why some Republicans are trying to eliminate a payroll tax cut that has helped create jobs.
A man who identified himself as unemployed asked Toomey how it was fair for corporations to avoid paying any taxes and criticized Republicans for suggesting that we eliminate a tax cut for the “working class” (the payroll tax cut). Toomey dodged the question about the payroll tax cut, saying that people don’t pay taxes on their unemployment benefits. He then repeatedly claimed that the United States has the world’s second-highest effective corporate income tax rate:
MAN: So you’re saying that we’re going to run out of money to fund Medicare [...] It again comes back to the tax breaks. The corporations have these big tax breaks, they’re not paying in, the bottom line is I’m still paying taxes. [...] Now, talking about not raising corporations’ taxes, but they also want to stop the federal tax breaks we’re getting now coming out of our paychecks. That comes on the working class.
TOOMEY: We oughta follow up, if you’re paying income taxes on your unemployment benefits, we should talk because that’s the way the tax code works. [...] Let me just illustrate the corporate side of this for just a second. These are not my numbers these are David Walker’s numbers. This is the effective corporate tax rate [...] after all the deductions after all the provisions [...] The United States is 2nd-highest. We are at just below 30 percent. [...] All of our competitors pay less.
The effective tax rate is the rate companies actually pay once all the credits, loopholes, and deductions in the corporate tax code are taken into account. And, as it turns out, the United States does not have the second-highest effective corporate income tax rate in the world. It is unclear what chart Toomey is using to claim this — although it should be noted that the man he cites, David Walker, is part of a larger conservative deficit hawk movement.
The United States actually has a lower effective corporate income tax rate than many other nations in the developed world. The World Bank-International Finance Corporation noted in 2009 that the U.S. has a lower effective corporate income tax rate than nations like Italy, Japan, Canada, and Germany. Even the ultra-conservative Business Roundtable supported a study that found five nations with higher effective corporate tax rates than the U.S.
Far from over-taxing corporations, the United States actually collects the second-lowest share of corporate income taxes as a percentage of GDP as of 2009 among similar competing nations in the OECD: