Dorgan Grabs His Pitchfork!

Dorgan Grabs His Pitchfork!

By SHARE

A new study from Congress indicates that two-thirds of corporations doing business in the United States did not pay taxes from 1998 to 2005. This has Sen. Byron Dorgan (D-N.D.) in a tizzy.

"It's shameful that so many corporations make big profits and pay nothing to support our country," Dorgan vented. "The tax system that allows this wholesale tax avoidance is an embarrassment and unfair to hard-working Americans who pay their fair share of taxes. We need to plug these tax loopholes and put these corporations back on the tax rolls." He added: "It's time for the big corporations to pay their fair share."

This is fine, rabble-rousing stuff that has almost nothing to do with the study.

The Government Accounting Office explicitly states that its research did not conclude why taxes weren't paid. Perhaps it's because the U.S. economy has taken some heavy beatings since 2001 and businesses aren't doing so well. Perhaps, too, it's because corporate profits are being re-invested into infrastructure and innovation. Or maybe it's because the vast majority of U.S. corporations are start-ups or small businesses, which rarely run in the black immediately.

Or perhaps, as Dorgan seems to believe, there are more nefarious reasons.

Before Dorgan's huffing translates into more disastrous economic policy for the U.S., it's worth looking at his comments piece-meal.

    1.) "It's shameful that so many corporations make big profits and pay nothing to support out country."

For starters, the GAO report said nothing about corporations making "big" profits—that's merely Dorgan's hunch. And as for "paying nothing to support our country," the senator might consider that these companies keep Americans gainfully employed, both directly and indirectly. These Americans in turn use their earnings to purchase goods and services, and to pay local, state and federal taxes of all sorts—income, property, sales, you name it. Dorgan might also remember that corporations are subject to property, state corporate income, and federal payroll taxes.

    2.) "The tax system that allows this wholesale tax avoidance is an embarrassment...."

"Tax avoidance" isn't the crime; it's the symptom. If the tax system were less onerous or abusive, or if it were far simpler, then "tax avoidance" wouldn't be the issue.

    3.) "We need to plug these tax loopholes...."

Like "tax avoidance," the term "loophole" is a populist catchword implying that perfectly legal behavior is somehow illegal. What Dorgan means to say is that, since corporations aren't rushing to hand over money to the IRS voluntarily—well, who is?—it's up to Congress to force them to.

    4.) "It's time for the big corporations to pay their fair share."

Dorgan's pitchfork-rattling notwithstanding, the GAO study actually found that roughly 75 percent of "big corporations" did pay federal corporate income taxes. Given the battering airlines and cars, two of the biggest domestic industries, have taken in recent years, the disparity seems entirely in line.

The larger point here is that Dorgan takes a simplistic approach to companies and their profits. He seems to view them as mere pillagers, stuffing their pockets with as much cash as possible and transferring the rest to a subsidiary in a lower-tax country. With combined federal, state and local taxes currently socking U.S.-based companies for some 40 percent—the second-highest burden behind Japan—the senator ought to be grateful that these companies remain here at all. Other countries, notably Ireland, Germany, Great Britain and Canada, have slashed taxes to well below the U.S. rate in a bid to woo these companies to relocate. Taxing America's companies even more might make a C.E.O.'s decision easier - and then there really would be fewer companies paying income taxes.