MARK MARTINEZ: GOP still peddling budget myths
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In May, I explained in these pages how Republicans have been peddling budget myths. And why not? According to GOP fables, market players are virtuous, the Bush years weren't so bad, and President Obama created trillion-dollar deficits. As I noted then, nothing could be further from the truth.
The commentary tells me I struck a nerve. While some of it was spirited, the response from Fred Drew ("Debunking liberal budget myths," June 20) was simply mind-numbing. As I noted on my blog, it was a lesson in how to build a wildly erratic Straw Man argument.
Because Drew's points are convoluted and in some instances made up, I won't join him in his cul-de-sac of ignorance. President Eisenhower understood this principle when he chose to ignore Sen. Joe McCarthy, saying he refused to be drawn into a "pissing match." Besides, The Californian's letter writers and online story commenters kicked Drew around pretty good. (Kudos.) Instead, I'll explain why the GOP's "We can't tax corporate America more" mantra is so full of holes.
GOP myth: Corporate taxes are too high. In March, "60 Minutes" did a story on corporate tax evasion, focusing on complaints that U.S. taxes were too high. Several points here.
First, there's a difference between what's on the books and what's actually paid. What's on the tax books is called the "marginal" (statutory) tax rate. U.S. corporations like to complain about this rate.
What's actually paid after the tax lawyers and accountants fix things is another matter. What's paid after the deductions, write-downs, charge-offs, write-offs, offsets, etc., is called the "effective" rate. U.S. corporations don't want to discuss this because the facts will anger middle America. Here's why.
While Goldman Sachs took a $10 billion taxpayer bailout, it also gamed its effective tax rate down to 1 percent. They did this through what their bonus-stuffed executives like to call "changes in geographic earnings mix." In plain English, they located their earnings in some island tax shelter.
This means that where firms like Goldman Sachs make their money (and get their bailouts) is not the same place where they claim their profits.
Now, to be sure, most corporations don't pay an effective tax rate of 1 percent. Many, like Exxon and General Electric, have years where they paid no taxes at all. They even receive billions in tax rebates, which boosts their bottom line and adds to record profits.
GOP myth: But, but ... foreign corporations pay less in taxes. We hear it all the time. "Corporate America is at a disadvantage because taxes are high compared to what corporations pay abroad." Again, start off discussing the marginal vs. effective (what's actually paid) rate. If your friend understands the concept (ask him to repeat it), explain how U.S. corporate tax rates are at a 40-year low and that:
* Corporate tax payments (as a share of GDP) have dropped more than 60 percent since the '50s (from 6 percent to under 2 percent).
* U.S. corporations ranked almost dead last in tax payments as a percentage of GDP (2002 figures) when compared to other OECD-based corporations (only Iceland ranked lower).
* At the end of Bush's second term, U.S. corporations remained at the bottom when it came to paying taxes (only Mexican and Chilean corporations paid less).
I know, I know. Your friends will probably stop listening to you at this point. Too many concepts and numbers. But you have to try. Consider it your kind act of the day.
If your friend(s) want to bring in Third World nations as a point of comparison, encourage it. But remind them there's a reason they don't vacation in the deregulated and tax-dodging paradises of Somalia and Haiti. Which brings us to this: What do U.S. corporations get in return for their tax investment? Corporate America depends on -- and draws from -- government-funded universities, infrastructures, research centers, our military, legal networks, policing bodies, etc. Then we have Bailout City. While this may come as a surprise to many in the GOP, none of this is actually free.
At the end of the day, the GOP needs to stop peddling these myths if they want to be seen as honest brokers. My guess is they won't, because they're not.
Mark A. Martinez, Ph.D., is the author of "The Myth of the Free Market" and a professor of political science at Cal State Bakersfield.
