We have higher corporate tax rates than most of Europe. Corporate tax isn’t a very good way to get revenue, in any case. Corporations are far more flexible than people are with their income.
People use their income to fund their lives. A corporation is different, its life is about creating value for others (investors.) No one is taxed on gross earnings, be they humans or corporations. That is why your Adjusted Gross Income when you file taxes is always going to be lower than your gross pay, the government isn’t going to make you pay taxes on your gross because they know you’re paying money out in payroll taxes for one, as well as perhaps retirement, health care, mortgage payments, and various other things governments are willing to let us deduct.
So if you take all the money corporations earn and then deduct all the money they had to spend to earn it, you have their taxable earnings. This is what is taxed by corporate income taxes. Here is where corporations are totally different from human beings.
Some corporations are very interested in generating a large amount of operating profit and paying hefty dividends to shareholders. These corporations will pay a lot of corporate income taxes. Other corporations are interested in extreme growth and do not care about paying dividends. Shareholders will buy stock in these companies because their value is increasing as the company’s operations expand, so even though they do not get dividend checks they realize a gain on their investment. These companies will not pay very high corporate income taxes because any money they have after operations will be used for capital expenditures, hiring new people and etc, all of those things are going to reduce the final taxable income of the corporation dramatically.
Interestingly, those things: capital expenditures and hiring new people, is by many people’s account a better use of a corporation’s money than paying dividends to shareholders. So many people who argue for high corporate income taxes aren’t arguing for it because they think corporations should pay more to the Federal government in absolute numbers, but because they believe higher corporate income tax rates will stimulate greater job growth and overall output of firms.
What would happen if you dramatically raised corporate income taxes is you would just cause corporations to decide they wanted to make more capital investments and hire more people. Unfortunately though that’s not always a good thing. Not every corporation is in the market position to justify that sort of thing, and in fact that sort of thing could cause organizational bloat and leave them running in the red down the road. Additionally, some corporations will find various ways to just pay top executives more and more fat bonuses and stock options instead of hiring more people, it’s debatable whether or not we want to promote that sort of thing (bloated executive compensation is neither great for the economy or the shareholder, and I say that as a very right-wing person.)
Whatever you may believe about corporate income taxes the one thing that is essentially true without a doubt is they aren’t a good way to fix deficit problems. High rates may be a good way to stimulate capital investment but they aren’t going to help the deficit because unlike people corporations can easily and without using “loopholes” or “illegitimate actions” lower their pre-tax earnings by simply spending those earnings on growing the business. If you tried to structure so that corporations could not do that, then you may get more money out of them but it might be worse for the economy overall because corporations would not be as interested in expanding.
