As Congress prepares to take up tax reform, a major issue will be the corporate tax rate. To many, the debate that will ensue will appear familiar. To advocate for corporate tax cuts, Republicans will point out that the United States has the highest statutory corporate tax rate among major economies . Democrats, on the other hand, will point out that the effective tax rate that corporations pay is often much lower than the statutory rate as an argument to target tax exemptions for businesses. Ironically, they are both correct — and so the statutory tax rate needs to be cut so that cronyist tax carve-outs can be eliminated.
The problem with setting such a prohibitively high tax rate is that corporations can reasonably argue that they need tax cuts in order to remain in business in the United States. And argue that they do. Corporations spent $838 million on lobbying expenditures in the first quarter of 2017 alone, a number that will surely grow as legislation to reform the tax code begins to emerge. The return on this “investment” is substantial; one report found that last year corporations benefited from more than $185 billion in tax breaks.
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