One talking point being pushed by some conservatives is that the tax rate for corporations is too high. A number of evils, such as unemployment, are blamed on this tax rate. The party line is that lowering the tax rate will increase hiring and help improve the economy.
At first glance, this has a certain appeal. After all, a tax rate of 35% seems rather excessive and it seems to just make sense that if companies paid lower taxes, then they would have more money to hire people, expand, and otherwise contribute to an economic recovery. However, a somewhat deeper look reveals the truth about the situation.
First, corporations have been making record profits and have not responded by hiring more people. As such, it seems likely that lowering taxes would not have any impact on hiring (unless the lower tax rates were linked to hiring people). After all, if record profits do not result in an increase in hiring, it seems unlikely that increasing profits a bit more by reducing taxes would have any special impact.
Second, when those favoring reduced taxes say there is a 35% tax rate they are rather like the infomercial shills who claim that they are offering, for example, $200 worth of products for $19.99. That is, what they say and what is real are two very different things. While it is true that the corporate tax rate is 35%, the reality is that most corporations do not pay taxes at that rate. In fact, 66% of American and 68% of foreign corporations paid no taxes from 1998-2005. The most famous of these is, of course, GE. GE paid no taxes in 2010 and apparently even claimed a tax benefit of $3.2 billion.
Given that most companies do not even pay taxes, it is difficult to believe that the 35% tax rate needs to be reduced or that reducing it would have any positive impact on the economy.
Third, the claim that lowering taxes will lead to more employment seems to be untrue. To support this, consider the example of GE. As noted above, GE paid no taxes in 2010 (and also claimed a tax benefit). If lower taxes caused companies to hire more people, it would seem to follow that GE should be hiring people. After all, their tax rate is 0% (or possibly a negative number). However, between 2007 and 2009 GE fired 21,000 Americans and closed 20 factories. One can only imagine what GE would have done if they actually had to pay taxes-presumably they would have fired all their American employees and closed all American factories. While this is but one example, this practice is a standard one among corporations. As such, the claim that cutting taxes for corporations will create jobs seems to be obviously false.
In light of the above arguments, lowering the tax rate for corporations would have no positive impact on jobs or the economy.
