Life is glorious:
Springtime is blossoming along the East Coast. America is setting records with as many as 4 million vaccinations in a single day. And most important, Washington is beginning a lengthy debate over the proper level of taxation of corporations.
Nothing symbolizes a return to normalcy like seeing those magic three words, “Corporate Tax Rate,” in the headlines. Suddenly, we are transported back to a world where Dwight Eisenhower, Lyndon Johnson or Ronald Reagan could still be president right now.
Arguing over corporate taxes rather than deranged tweets highlights the contrast between Joe Biden and Donald Trump in the Oval Office.
Yes, the Trump 2017 tax cuts did slash corporate rates to 21 percent, the lowest level since the 1930s. But be honest: Is that tax law really among the top 50 things you remember about the Trump years?
Congress has been wrangling over corporate taxes since before World War I. The nominal rate reached its height of about 50 percent during the 1950s and 1960s.
In that context, Biden’s proposal to increase corporate taxes to 28 percent is modest by historical standards. And it is telling that Biden resisted the temptation to try to restore the 35 percent rate that prevailed from 1993 to 2017.
What is so wondrous about the never-ending struggle over corporate taxes is that no one has found the permanent answer. The right rate for the moment depends on the state of the U.S. economy, the prevalence of loopholes, global tax collections, overall corporate behavior and dozens of other factors.
Reverting to type
The architect Ludwig Mies van der Rohe is often mistakenly credited with the phrase, “The devil is in the details.” My guess — although I have no evidence for it — is that the line actually originated with a corporate lobbyist bragging about saving a client billions by stealthily inserting seven words into a 987-page tax bill.
The Republican response to Biden’s corporate tax proposals was as predictable as it would have been if Bob Dole or Everett Dirksen were the Senate GOP leader. Mitch McConnell denounced Biden’s overall plan for being built around “massive tax increases on all productive parts of our economy.”
In similar paint-by-numbers fashion, the Biden White House is flogging studies by liberal think tanks highlighting how many major corporations have avoided paying any income taxes in recent years. For example, the Institute on Taxation and Economic Policy estimated that at least 55 profitable companies (including Nike, Salesforce and FedEx) took a tax holiday in 2020.
What these ritualistic exchanges obscure is how much consensus there is over corporation taxation. The difference between the current 21 percent and Biden's advocacy of 28 percent is relatively small. And, already, West Virginia Sen. Joe Manchin — the most important swing voter in America — wants to split the difference at 25 percent.
It is also significant that Treasury Secretary Janet Yellen has just proposed a global minimum corporate tax rate. This effort to create international unity on corporate taxation, as quixotic as it may be, reflects an awareness of GOP arguments that too high a corporate rate undermines U.S. competitiveness on a world stage.
But politics in 2021 is too toxic to easily compromise on anything. Everything becomes reduced to a naked struggle for power masquerading as principled differences on the issues.
New thinking needed
As a center-left columnist, my predilection is to believe that current corporate rates are too low. I will also admit that in any protracted debate, I would resort to the shorthand that economists who agree with me are always right and those who disagree are always wrong.
Of course, that is an intellectually dubious approach to policymaking. But I mention it because, I suspect, more than 95 percent of members of Congress will take the same reflexive approach on corporate taxation.
If ever there were a moment for economists of all stripes to display a dollop of humility, it is now, in the spring of 2021.
We are coming out of a once-a-century pandemic with the financial pain lessened by unprecedented levels of federal spending and debt. Even when COVID-19 is mercifully behind us, there is no guarantee that significant segments of the economy, such as commercial real estate, shopping malls and the travel industry, will bounce back to their 2019 levels.
Every economic model reflects the assumptions that go into it. And when the ground under our feet is constantly moving, it is challenging to figure out what the right assumptions are.
The nature of business itself is also changing.
The corporate protests over the new Georgia voting laws have left McConnell lost in a maze of contradictions. The greatest Senate proponent of corporate free speech when it comes campaign spending is now sputtering, “Corporations will invite serious consequences if they become a vehicle for far-left mobs to hijack our country.”
Somehow I doubt that these “serious consequences” include McConnell supporting raising the corporate tax rate to 28 percent or higher.
The corporate reaction to Georgia brings to mind the 1990s business buzzword “stakeholders.”
Once, in economic theory, the only figures who mattered were a company’s shareholders. But these days, a well-managed corporation has to also worry about the sentiments of its talented workers and the expectations of its customers, particularly affluent ones. And what should frighten McConnell is that both of these groups are rejecting the Trumpian tinge of the Republican Party.
That’s why Republicans should be rooting for a protracted back-and-forth on corporate taxation. It is not that this is necessarily a winning issue in 2022, but it does provide a distraction from the conspiracy theories about a stolen election being peddled by a former president exiled to Mar-a-Lago.
Walter Shapiro has covered the last 11 presidential campaigns. He is also a fellow at the Brennan Center for Justice at NYU and a lecturer in political science at Yale. Follow him on Twitter @MrWalterShapiro.