Arguably, the United States now has a corporate tax code that’s the worst of all worlds. The official rate is higher than in almost any other country, which forces companies to devote enormous time and effort to finding loopholes. Yet the government raises less money in corporate taxes than it once did, because of all the loopholes that have been added in recent decades.
“A dirty little secret,” Richard Clarida, a Columbia University economist and former official in the Treasury Department under President George W. Bush, has said, “is that the corporate income tax used to raise a fair amount of revenue.”
Over the last five years, on the other hand, Boeing paid a total tax rate of just 4.5 percent, according to Capital IQ. Southwest Airlines paid 6.3 percent. And the list goes on: Yahoo paid 7 percent; Prudential Financial, 7.6 percent; General Electric, 14.3 percent.
Economists have long pleaded for an overhaul of the corporate tax code, and both President Obama and Republicans now say they favor one, too. But it won’t be easy. Companies that use loopholes to avoid taxes don’t mind the current system, of course, and they have more than a few lobbyists at their disposal.
The rich getting richer, not because they work harder, because they have the tax codes as incentives. Which leads to inefficiencies.
Decisions that would otherwise be inefficient for a company — and that are indeed inefficient for the larger economy — can make sense when they bring a big tax break. “Companies should be making investments based on their commercial potential,” as Aswath Damodaran, a finance professor at New York University, says, “not for tax reasons.”
Instead, airlines sometimes buy more planes than they really need. Energy companies drill more holes. Drug companies conduct research with only marginal prospects of success.
Inefficiencies like these slow economic growth, and they are the reason that both conservatives and liberals criticize the corporate tax code so harshly. Mitch McConnell, the Republican Senate leader, says it hurts job creation. Mr. Obama, in his State of the Union address, said that the system “makes no sense, and it has to change.”
![pantslessprogressive: Rumsfeld’s Defense of Known Decisions | New York Times The title of former Defense Secretary Donald H. Rumsfeld’s new memoir, “Known and Unknown,” comes from a remark he made about whether Iraq had supplied or was willing to supply terrorists with weapons of mass destruction. “Reports that say that something hasn’t happened are always interesting to me,” he quipped in 2002, “because, as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns — the ones we don’t know we don’t know.” Mr. Rumsfeld’s memoir plays a fast and loose game of dodge ball with what are now “known knowns” and “known unknowns” about the wars in Iraq and Afghanistan. The tedious, self-serving volume is filled with efforts to blame others — most notably the C.I.A., the State Department and the Coalition Provisional Authority (in particular George Tenet, Colin L. Powell, Condoleezza Rice and L. Paul Bremer III) — for misjudgments made in the invasion and occupation of Iraq, and the failure to contain an insurgency there that metastasized for years. It is a book that suffers from many of the same flaws that led the administration into what George Packer of The New Yorker has called “a needlessly deadly” undertaking — that is, cherry-picked data, unexamined assumptions and an unwillingness to re-examine past decisions. Not only does Mr. Rumsfeld frequently assume a smug, know-it-all tone — he says he warned President George W. Bush to “tone down any triumphalist rhetoric” in his end-of-major combat-operations speech, made on May 1, 2003, in front of a “Mission Accomplished” banner — but he also displays a tendency, familiar to viewers of his news conferences, to make bold assertions with no pretense of substantiation. [read more] Never forget how incompetent and willfully ignorant this man was, and never forget that he and Dick Cheney spent 30+ years crafting neo-con rhetoric that was ultimately the Bush Administration cabal.](http://28.media.tumblr.com/tumblr_lg2krqaTYJ1qzr73ro1_500.jpg)
