Feature

GE’s tax bill isn’t the real scandal

The smart response to GE’s evasion isn’t to raise taxes on multinational corporations, said Robert Samuelson in The Washington Post.

Robert SamuelsonThe Washington Post

The country was scandalized by the recent “blockbuster story” that General Electric paid no U.S. income taxes in 2010, despite worldwide operating profits of $14.2 billion, said Robert Samuelson. Politicians and activists are calling on Congress to do something. But the smart response to GE’s evasion isn’t to raise taxes on multinational corporations. Instead, the U.S. should cut the top corporate tax rate from its current 35 percent, and, to make up for lost revenue, raise the individual rate on dividends and capital gains, currently taxed at “a ridiculously low” 15 percent.

Let’s say we lower the top corporate rate to 26 percent—closer to Europe’s average rate of 25 percent—and return to taxing dividends and capital gains at 28 percent. That would make the U.S. a more inviting destination for foreign and American multinationals. It would also end “a giveaway to the rich,” who collect two thirds of all dividends and capital gains, and “remove a tax subsidy that favors paper investing over real production.” In a globalized economy, the U.S. needs a tax code that is more hospitable to multinational corporations and less “unjustifiably” lenient on hedge fund managers and the top 1 percent of all taxpayers.

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