In a column headlined "A Word From the Wise" (3/3/10), New York Times columnist Thomas Friedman lets us know what Intel CEO Paul Otellini thinks is wrong with the U.S. economy. And there's a certain theme that runs through his critique:
"The things that are not conducive to investments here are [corporate] taxes and capital equipment credits."… "If I build that factory in almost any other country in the world, where they have significant incentive programs, I could save $1 billion," because of all the tax breaks these governments throw in…. "The cost of operating when you look at it after tax was substantially lower."… If the government just boosted the research and development tax credit by 5 percent and lowered corporate taxes…. With the generous research and development tax credits and lower corporate taxes they receive, Intel's chief competitors in South Korea basically have "zero cost of money."…
You think maybe the CEO of Intel would like to not pay so much in taxes?
One thing is strikingly missing from Friedman's column: any discussion of how high U.S. corporate taxes actually are. On paper, the country has some of the highest corporate tax rates in the world–but as Otellini's reference to "tax breaks" suggests, what matters to business executives is how much they actually pay. And as a share of the total economy, U.S. corporate taxes are some of the lowest in the world: According to a Congressional Budget Office report (11/05), out of 31 industrialized countries, 28 have corporate taxes as a bigger share of the economy and only two have less.*
"'Something has to pay for' everything government is doing today," Otellini lectures the United States via Tom Friedman. But it shouldn't be corporate America, apparently.
*In the U.S., corporate taxes are 1.8 percent of GDP, vs. 2.9 percent in Britain and France, 3.1 percent in Japan, 3.4 percent in Canada, 5.3 percent in Australia and 8.2 percent in Norway. Germany is the one major country where corporate taxes are a smaller share of the economy, at 1.0 percent of GDP.