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Not taxing U.S. corporations gives a pass to foreigners [Commentary]

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Supreme Court conservatives continue to insist that corporations have the same rights as people on matters ranging from making campaign donations (Citizens United) to raising religious objections to government policies (Hobby Lobby).

Meanwhile, anti-tax conservatives continue to argue that corporations are inhuman and it's foolish to tax them because the cost will be passed along to actual humans.

Forget for a moment the contradictory notion that a corporation increasingly enjoys the same civil protections of a living, breathing person yet conveniently reverts to an inanimate entity when it comes to fiscal responsibility. Forget, too, that if corporate taxes are merely passed through to consumers there should be little objection to their imposition in the first place.

No: What's galling is that conservatives oppose corporate taxes given the increasingly foreign tilt of American corporations.

Before examining how foreign "American" corporations are, let's first document the dramatic shift in corporate taxation in recent decades.

According to Politifact.com, fully two thirds of American corporations today pay no net income tax. Of course, that figure includes thousands of small companies with a handful of employees. But even among large corporations — those with at least $250 million in assets — only about one-fourth pay any taxes.

Not surprisingly, since 1955 the share of federal tax revenues derived from corporate taxes shrank more than two-thirds, from 27.3 percent to 8.9 percent; during the same period, income and payroll taxes increased by more than a third, from 58 percent to 81.5 percent.

Now, if corporate taxes were merely passed along to American stockholders and consumers, perhaps this dramatic shift in tax burden wouldn't matter all that much: Americans would still pay those taxes, directly or indirectly.

But U.S. corporations are becoming less and less American. That is, the markets into which they sell their products — and, if publicly-traded, the nationality of their stockholders — have become increasingly globalized.

Take Exxon, for example. As of 2011, the oil conglomerate derived 45 percent of its revenues from overseas. The overseas shares for competitors Chevron and ConocoPhillips are only slightly lower.

Wal-Mart is a more domesticated company, so to speak; it derives only 26 percent of its revenues from foreign sales. But iconic U.S. companies like Ford (51 percent) and IBM (64 percent) already collect more than half their revenues from overseas.

As for costs of higher corporate taxes to stockholders of publicly-traded American corporations, foreigners already hold an estimated 12 percent of U.S. corporate stock — and this share continues to grow.

That said, if conservative politicians and jurists continue their push to extend personhood status to corporations, and anti-tax conservatives continue to press for lower corporate taxes, they ought to realize that they are granting the tax relief and privileges of expanded citizenship status to millions of non-American investors and consumers.

I wonder how many of the xenophobic, flag-pin-wearing conservatives — those who support voter ID laws designed to disfranchise living, breathing American citizens and who oppose granting citizenship to undocumented workers — realize that their politics lead to the expanded corporate personhood rights of (mostly wealthy) foreigners?

A final point: If corporate taxes are merely passed along in the form of higher consumer prices, shouldn't conservatives be calling for higher corporate taxes as a clever means of shifting the costs of American governance onto the foreign consumers who account for a rising share of U.S. corporate revenues?

Indeed, so much of contemporary state-level tax policy — from the surcharges tourist-dependent Florida charges hotel guests to the fights here in Maryland over expanding legalized gambling — is essentially an elaborate, interstate contest to devise new and more clever ways for state governments to extract tax receipts from their neighbors. Applying the same burden-shifting principle to the globalized tax economy, wouldn't it make perfect sense for Washington to find creative ways to make foreigners — who live under our expensive military umbrella, after all — pay more?

Sorry to inform conservatives, but their incoherent and inconsistent positions on taxes and personhood only place a higher federal tax burden on the shoulders of regular American taxpayers.

Thomas F. Schaller teaches political science at UMBC. His column appears every other Wednesday. His email is schaller67@gmail.com. Twitter: @schaller67.

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