December 08, 2011
The raucous race for the GOP’s 2012 presidential nomination could
hold one or two more surprises, but at this moment, things look awfully grim
for Mitt Romney.
Too rich. Too slick. Too many flip-flops. Too many establishment
endorsements. Too perfect home life. And
too damned good looking. Altogether, the objections presented an enormous
opening for competitors. And after flirting with a handful of alternatives, Republican
voters appear to favor a pudgy, rumpled, motor-mouthed, thrice-married
But win or lose, give the field’s most boring candidate credit.
In 2011, of all the never-ins,
and heavy hitters, he made the most interesting comment.
You probably missed the observation, since it came in the dead
of summer, when sane people don’t devote a single neuron’s attention to
politics. In August, while speaking at the Iowa State Fair, protesters hammered
the former governor of Massachusetts
with predictable blather about taxing corporations.
“Corporations are people, my friend,” Romney replied.
Incredulous, the hecklers howled their disagreement.
“Of course they are,” Romney shot back. “Everything corporations
earn ultimately goes to people. Where do you think it goes? Whose pockets?
People’s pockets. Human beings, my friend.”
A frontrunner’s defense of corporations during a lengthy
economic bust was enough of a jolt. The response by Romney’s handlers was even
more shocking. They didn’t provide the requisite “what our candidate meant to say” clarification. The
campaign’s chief flack tweeted, “Do folks think corporations are buildings?
They’re people who incorporate to conduct business. They create jobs and hire
However heretical such thinking may be in Manhattan
it’s not controversial among economists. In a 2001 analysis for the
Tax Foundation, Michael L. Marlow, a professor at California Polytechnic
explained that corporations are merely a “nexus of workers, customers, and
So why, it’s worth asking, does the “hyper-capitalist” United
States have one of the highest corporate-tax rates in the developed world?
No one disputes the numbers. According to the Organisation for
Economic Co-operation and Development, only Japan grabs a greater share of corporate
income. Combine states’ taxes with the federal government’s take, and the U.S. rate
is just shy of 40 percent.
Who is kinder to corporations? The U.K.,
Denmark, Switzerland, Slovenia,
Ireland, Iceland, Estonia,
Turkey, Korea, Chile,
Closer to home, there’s Canada
(27.6 percent) and Mexico
rates, it’s important to note, are not effective
rates. Jump through politicians’ central-planning hoops, and your firm will
benefit. For example, “tax expenditures” are available for biofuel producers, companies
with big research and development costs, and investments made in low-income
housing. The Tax
Foundation estimates that in fiscal 2012, the value of all the tax perks
available to corporations at the federal level will top $117 billion.
Most-favored industries include mining, manufacturing, and accommodation/food
services. Less politically juiced lines of work include education, healthcare,
and wholesale/retail trade.
A final fact about the corporate tax. It’s a revenue force-multiplier.
Marlow explains: “The federal government first collects taxes on corporate
profits and then taxes shareholders through the personal income tax code on
either their dividend income or their capital gain.” With so many American
households owning stocks -- either directly or through retirement vehicles --
the “people” Romney mentioned probably include a fair amount of “Occupy” ne’er-do-wells.
In an issue
brief for the Heritage Foundation, Karen A. Campbell argued that if the
corporate tax were killed, “investments would flow into the country.
Multinational and international companies would be encouraged to operate in the
bringing jobs and new technology to meet today’s economic challenges. Owners of
corporations -- those who earn the profits -- would have more resources to
invest in things that create value for others.”
Repeal, John Steele Gordon believes, can also serve as a powerful
good-government tool. “The ability of Congress and the president to hand out
quiet political favors to the rich and powerful,” the business historian wrote
in a 1998 piece for The Wall Street
Journal, “would be greatly circumscribed.” In addition, “tens of thousands
of highly talented accountants and lawyers would have to go out and get
wealth-creating jobs because the economically parasitic ones they have now
His quest for the presidency is battered, panicky, and perhaps headed
for oblivion, but this summer, in an unscripted exchange amidst a tightly
rehearsed campaign, Mitt Romney uttered the unspeakable. He unapologetically defied
prevailing populist nonsense, and linked corporations’ fortunes to the
well-being of regular folks.
Think Mitt might agree to be President Newt’s tax-policy czar?
D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.
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