Coalition Calls for Repeal of Corporate Tax Benefits

The undersigned organizations urge Congress to reduce corporate tax subsidies, and use the savings to help address our long-term budget deficit and protect public investments.

It makes no sense for Congress to debate cuts in public services that working families rely on while ignoring the public spending that benefits corporations and is hidden in the tax code.

A subsidy provided in the form of a special tax break or tax loophole has the same effect and cost as a direct spending subsidy. But lawmakers have often ignored tax subsidies, particularly those that take the form of corporate tax loopholes.

The United States has a statutory corporate income tax rate of 35 percent, but U.S. corporations use these tax loopholes to reduce their effective income tax rate to far below 35 percent.

These tax loopholes often subsidize corporations for engaging in activities that do not make economic sense and some may even subsidize corporations for moving jobs offshore. Some U.S. corporations use these loopholes to avoid U.S. income taxes entirely.

In fact, a 2007 report from President Bush's Treasury Department concluded that the share of profits paid in taxes by U.S. corporations is below the average paid by corporations of other developed countries.

Some lawmakers have proposed to eliminate corporate tax subsidies and use all of the resulting revenue savings to pay for a reduction in the corporate income tax rate. In contrast, we strongly believe most, if not all, of the revenue saved from eliminating corporate tax subsidies should go towards deficit reduction and towards creating the healthy, educated workforce and sound infrastructure that will make our nation more competitive.

Given our long-term budget deficit problem, no one should accept a proposal to cut public services if the money saved is used to pay for a reduction in tax rates. Likewise, we believe it would be equally ill-advised to use the money saved from reducing corporate tax subsidies to pay for a reduction in corporate tax rates.

Some corporate leaders argue that a low corporate income tax rate would make our nation more competitive. But our competitiveness depends far more on public investments that create a healthy, educated workforce and a sound infrastructure. These public investments -- such as education, health care, nutrition assistance, environmental protection and transportation -- will face deeper cuts if we fail to rein in tax subsidies to profitable corporations.

Sincerely,

Community Action Human Resources Agency