Seven months after Trump’s tax cut
Corporate tax collection rate at historic low
26 July 2018
The rate of tax collection from US corporations has dropped to a near-record low, according to a report by The New York Times.
Trump’s tax cuts, passed in December of last year, have caused a dramatic drop in the money being collected from major corporations, leaving their rich shareholders wealthier and the federal government deeper in debt. According to the White House’s Office of Management and Budget, the reduced corporate taxes will produce an additional $1 trillion in federal debt over the next decade.
Between just January and June of 2018, money gained from corporate taxes had dropped almost $50 billion from the year prior, a drop of one third. This huge sum, now in the pockets of the big companies, is not far behind the federal education budget of $68 billion a year.
The historic low in tax collections from US corporations, however, is not simply a national phenomenon caused by Trump. A new study by Ludvig Wier, an economist at the University of Copenhagen, has found that between 1985 and 2018 the average corporate tax rate has fallen from 49 percent to 24 percent. Speaking to the Washington Post, Wier remarked that “Corporate taxes are going to die in 10 to 20 years at this rate.”
Wier notes that in the face of offshore tax havens there is intense pressure on nations to lower their corporate tax rates. His paper estimates that in 2015 more than $600 billion of profits from corporate firms were transferred to several key tax havens. Wier’s paper, which was written with Gabriel Zucman, the University of California, and Thomas Tørsløv, the University of Copenhagen, states, “The massive tax avoidance—and the failure to curb it—are…