Republicans are taking their corporate tax-cut campaign on the road. House Speaker Paul Ryan visited airplane manufacturer Boeing on Thursday in Washington state, where he lamented how the company is quivering underneath the weight of a 35 percent tax rate. Meanwhile, Ways & Means Chair Kevin Brady sang the same song at telecom giant AT&T’s headquarters in Dallas.
There’s just one problem. Neither of these corporations pays the statutory 35 percent tax rate for corporations. Over the past eight years, Boeing has paid an effective tax rate of just 5.4 percent on its profits while AT&T has paid 8.1 percent, according to a report by the Institute on Taxation and Economic Policy. In fact, it’d be quite hard for Ryan to find a company to visit that actually does pay the full rate. Most corporations pay nowhere near the full rate thanks to a bevy of tax breaks and loopholes—the average is closer to 20 percent, though even that varies tremendously by industry.
Ryan and other GOP leaders want to shave the statutory rate down to 20 percent while President Donald Trump wants it reduced to 15 percent. Neither has given any indication as to whether their idea of corporate tax reform includes closing loopholes. They simply contend that cutting the rates will make American manufacturers more competitive with foreign companies, and will use the money they save to invest domestically in research and development, which will in turn drive economic growth and create jobs.
But through federal and state subsidies and tax breaks, corporations like Boeing and AT&T have for years benefited from a low effective tax rate. As ITEP’s Matthew Gardner explains, Boeing has received a tax refund in five of the past ten years. It saves itself $542 million a year using a special domestic manufacturing tax break, and $1.8 billion in further cuts thanks to a research and development tax credit. Boeing also benefits from the immensely favorable depreciation schedules on capital that has saved it billions of dollars over the past decade.
Boeing also entered into a $9 billion tax incentive deal with Washington state back in 2013—the largest corporate subsidy ever—to “maintain and grow its workforce within the state.” But, as Michael Hiltzik points out in the Los Angeles Times, the company has since cut nearly 13,000 jobs (about 15 percent of its Washington workforce) as it sets up shop in cheaper states that offer incentives of their own.
It still manages to enrich its shareholders though. On the same day that it announced a production slowdown in December, Hiltzik notes, Boeing also announced a 30 percent increase in its quarterly dividend and a new $14 billion share-buyback program.
The current corporate tax system doesn’t incentivize job creation. Rather, it incentivizes the enrichment of CEOs and shareholders. Simply cutting the rate without closing loopholes or including clear economic-development requirements will only further advance shareholder capitalism, to the detriment of just about everyone else.
Ryan's and Brady’s visits to Boeing and AT&T expose the core lie behind their corporate tax-cut agenda. Corporations are already benefiting from lower rates—and they sure aren’t using the extra money to create jobs.