WASHINGTON – American Federation of Government Employees National President J. David Cox Sr. today praised a new report from the Center for Effective Government that debunks the myth that raising corporate tax rates to pay for critical government services will hurt economic growth.
The report released today, “The Corporate Tax Cut Debate: Lower Taxes on Corporate Profits Not Linked to Job Creation,” reveals a positive link between high corporate tax rates and job creation. The 30 corporations that paid the highest effective rates on their profits between 2008 and 2010 added 200,000 jobs to the U.S. economy during the past five years, while the 30 corporations with the lowest tax rates shed more than 50,000 jobs during the same period.
“This report fundamentally changes the shape of the budget debate in Washington,” Cox said. “We’re not facing a budget crisis like many would like us to believe, but a jobs crisis. This report proves that raising tax rates on corporate profits has zero impact on jobs in the U.S. We need to shift the debate from gutting critical government services that the American people rely on to making sure that large corporations stop gaming the system and pay their fair share.”
On average, U.S. corporations pay just 12.6 percent of their profits in federal income taxes. Many companies avoid paying taxes on their profits by shifting the profits to foreign tax havens, where they are generally not taxed. This sort of offshore tax abuse by corporations costs the U.S. Treasury an estimated $90 billion a year.
Instead of taxing the very corporations that are destroying good jobs, Congress has targeted federal employees for years of painful financial sacrifices. Federal employees have not had a pay increase for three consecutive years and lost a week of wages this summer due to sequestration, while new federal employees must pay nearly four times more toward their retirement. Now comes word that the Budget Conference Committee is considering slashing the pay of all current federal employees by increasing their share of retirement contributions.
“By stopping just one year of corporate tax haven abuse, the government could have prevented nearly all three years of the federal pay freeze,” Cox said. “The game needs to stop here. Instead of pursuing proposals that would slash wages and benefits for millions of hard-working Americans, Congress needs to close these tax loopholes that have allowed corporations to avoid paying hundreds of billions of dollars in taxes. America’s workers are expected to pay their taxes in full and on time, and we should demand nothing less from the companies doing business in this country.”
In 2012, U.S. corporations reported earning nearly $1.8 trillion in profits. Had they paid a 35 percent tax rate on those profits, total corporate tax receipts would have been $630 billion, rather than the $242 billion they actually paid.