Loop Holes in Job Creation

The debate surrounding job creation has come to a head with a speech given by President Obama on September 8, 2011. In his speech , President Obama, spoke of a job's bill that he believes will help create jobs. Congress seems to have been waiting for a jobs bill with speaker of the house John Boehner sending a letter to President Obama after the speech stating, "We look forward to receiving legislative text for any of your ideas..." According to the letter, Congress agrees "jobs must be the to priority..." but "we have a different vision in terms of what is needed to boost private-sector job creation in our country..." Businesses seem to agree change is needed. The Business Roundtable (BRT) began a February 11, 2011 statement on regulatory reform by saying, "America’s CEOs applaud President Obama’s initiative to streamline the federal regulatory apparatus..." The BRT had this to say in reaction to President Obama's September 8 speech, "'Special-interest loopholes' are, in fact, most often well-considered expressions of tax policy legislated to achieve an economic goal...Journalists, at least, should refrain from using the loaded term as a description for 'disfavored tax policies.'"

As Americans watch and listen to these three groups debate the best plan of action they read stories like "The Paradox of Corporate Taxes" and wonder if any group will act. "The Paradox of Corporate Taxes" by David Leonhardt tells how the Carnival Corporation benefits from the US government in ways such as: safe passages due to the US Coast Guard, help from customs officers, and infrastructure provided by state and local governments. According to Leonhardt Carnival has benefited from these services while only contributing 1.1% in taxes. According to the Tax Foundation, "The statutory rate of the U.S. corporate income tax is currently 35%, the second highest in the world." It would seem the "special-interest loopholes" that the BRT is found of, Congress has ideas about, and President Obama wants to eliminate is where the focus should be.

A special report by William McBride of the Tax Foundation shows the effective corporate tax rate ranged from 27.5 to 22.8 between 1999 and 2008, respectively. The report goes on to show that domestic businesses, which tend to be small, are paying close to 35% while large multi-national corporations (MNCs) are paying less. McBride makes the case that if foreign taxes are included MNCs are paying between 32.1% and 33%. Are we comfortable allowing MNCs to almost meet the US statutory rate of 35% when the US is not collecting between 12.2% and 7.5%? In 2008 MNCs had income subject to tax of $737 billion and an effective tax rate of 21.2%. This means MNCs did not pay 13.8%, $101.7 billion.