Budget Deal: A Missed Opportunity To End Corporate Tax Breaks

Congress’ recent bipartisan budget agreement represents a tiny step forward for our country because it replaced many of the automatic spending cuts that were hurting kids, seniors and middle class families – and it showed that governing is possible in Washington, D.C. But it was also a missed opportunity to close huge tax loopholes that large corporations use to avoid paying an estimated $756 billion in U.S. taxes over the next ten years.

And to those who say that lower tax rates for corporations helps spur job creation? I point you to a report, released earlier this month by the non-partisan Center for Effective Government (CEG), that examined the tax rates paid and jobs created by 60 large, profitable companies. The companies were not cherry-picked. Rather, they came from a larger group of 280 corporations and CEG examined the 30 companies that paid the highest effective tax rate and the 30 companies that paid the lowest effective tax rate.

The report’s conclusion? The 30 companies that paid the highest tax rates created nearly 200,000 jobs over a five-year period. Conversely, the companies that paid little in taxes or no taxes whatsoever shed about 51,000 jobs during that same period.

For years, business lobbyists have advanced the theory that lowering corporate tax rates would create jobs in the U.S. We can all agree that America needs good-paying jobs created, and kept, here at home. But now, as the CEG report shows, the lobbyists’ premise is false. Indeed, some corporations that faced the lowest tax rates on profits shed large numbers of jobs.

“The notion that reducing the taxes corporations pay on their profits will create jobs in the U.S. is just not borne out by the evidence we examined,” said Katherine McFate, President and CEO of CEG and co-author of the report.

McFate’s findings are timely, and not just for legislators in Washington. In Springfield, companies like ADM are trying to squeeze Illinois taxpayers with threats to move out of the Land of Lincoln if they don’t get millions in tax breaks. Given our state’s fiscal challenges, how can we justify giving into such threats?

Rather than avoiding taxes and lobbying for even lower rates, we need all companies – and many big and small businesses already do – to pay their fair share for the national public structures that allow their businesses to be profitable in the first place. Corporations enjoy a number of benefits that clearly are the result of taxes all of us pay: a workforce educated at public expense, roads and transit systems that allow employees to get to work and goods to reach customers, and consumer safety standards and inspections that give consumers confidence in products.

Some economists believe that if we close just some of the largest corporate tax loopholes and make corporations pay their fair share, we can raise $765 billion over the next ten years to fund our priorities and strengthen our economy. That kind of money can create millions of good-paying jobs and pay for investments that Americans overwhelmingly support – from good schools and teachers to infrastructure projects like roads and bridges or reducing the deficit.

The recent budget agreement will replace $63 billion in indiscriminate sequester cuts and reduce the deficit by just over $20 billion – a drop in the bucket compared to the $765 billion we could’ve seen.

While many companies have bounced back from the recession, that’s not true for most Americans hit hardest by the downturn. We need leaders nationally and in Illinois to do what’s fair and, as the new report suggests, economically sound: make sure every big company is paying its fair share.  

Ryan Canney is Director of Illinois Fair Share, which stands for an America where everyone gets their fair share, does their fair share and pays their fair share; and where everyone plays by the same rules.