Corporate tax rates are a sham

From Robert Reich

Corporations based in the U.S. are supposed to pay a 35 percent corporate income tax on whatever profits they earn around the globe. But those taxes are reduced by any tax payments they make to foreign governments. And they don’t have to pay any U.S. tax until they bring their profits home.

Nonetheless, Pfizer’s CEO, Ian Read (below) recently complained that the firm was at a “tremendous disadvantage” because some its foreign competitors pay only a 15% tax rate, and he reported to investors that it paid 25 percent of last year’s profits in taxes. But according to today’s Wall Street Journal, the actual rate of U.S. tax Pfizer paid last year was 7.5 percent. It would have paid 25 percent if it brought all its profits back to the U.S. but it stockpiles its profits overseas. In fact, Pfizer is now considering merging with Allergan – thereby moving its headquarters to Ireland, and no longer even being American.

In other words, Pfizer’s complaint is bogus. Moreover, it should be paying a 25% tax rate because as a U.S. based pharmaceutical company it enjoys special advantages such as access to basic research from the National Institutes of Health, and U.S. representation in global trade talks (such as the Trans Pacific Partnership, which is giving pharmaceutical companies extra intellectual property protection abroad). These benefits should end if it leaves the U.S.

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