Corporate Tax Reform, Not Closing Loopholes, Will Create the Revenue We Need
February 28, 2013
In a combative interview between Sean Hannity and Rep. Keith Ellison (D-MN) on Fox News this week, Hannity brought up the $16 trillion national debt. Rep Ellison followed with his suggestions on where to start in order to bring it down:
“[L]et’s close loopholes on large corporations; let’s say that yachts and jets should not be something you can write-off; let’s say that ExxonMobil and Chevron should not get a tax rebate and a subsidy…”
First of all, there is much debate around what is actually a loophole, but let’s cede the point for now. Even if we are generous, Rep. Ellison’s suggestions would not get us very far in debt reduction.
The Joint Committee on Taxation estimated the 2012 corporate tax expenditures to total about $148 billion – a number that includes provisions that are decidedly not loopholes. But for now we’ll put aside whether everything included in that total is actually a loophole and we’ll assume that if you eliminated those expenditures, the Treasury Department would get that entire $148 billion in revenue. That would hardly have made a dent in the $1.089 trillion deficit from 2012, leaving a deficit of $941 billion, and not coming close to touching the $16.6 trillion debt.
Of that $148 billion, only $2.7 billion comes from expenditures specific to the oil and gas industry. That would fund the government for a couple hours.
Rep. Ellison is right that if the federal government wants to maintain current spending levels, or even post sequestration levels, then we're going to need more revenue. But the last couple years of recession are proof that when the economy is down, revenues are too.
Instead, the best way to gain revenues and cut the deficit, and eventually the debt, is economic growth. Fundamental corporate tax reform would advance that goal.
A code built from scratch – ideally a territorial system with a low rate – would not need extensive tax expenditures or special interest carve-outs. The code would be transparent, simplified, and competitive.
A reformed corporate tax code would put us back on equal footing with our competitors around the globe and spur the economic growth that would lead to the revenue – and the jobs – the U.S. needs.