Breaking down corporate taxes

A letter in the July 7 edition of the Daily Herald says, “U.S. companies (are) hardly at a disadvantage,” referencing oft-heard comments about American businesses playing on a sloped playing field.

American businesses pay income taxes. That results in an average of 25.9 percent of American product prices being federal tax and related “compliance costs.” The WTO prohibits waiving or rebating those taxes when our products are exported. When those exports arrive in foreign countries they add their federal taxes on top of ours.

But foreign countries can export their products tax-free to the U.S., and we don’t impose federal taxes on those imports. That seems like a one-way street to me. The result is our $1.5 trillion trade deficit.

This is why American companies move manufacturing abroad. They gain a price reduction of 25 percent or more, and can ship from there to anywhere in the world — including the U.S. — tax-free. Our tax system forces the export of our production lines and jobs.

The letter writer apparently doesn’t understand that companies don’t really pay taxes. Consumers, as they buy products, pay all their expenses, including taxes and related “compliance costs,” which can exceed the tax amount of those manufacturers. Consumers are far better off if they pay those taxes directly.

That same letter complains about G.E., one of the president’s strongest corporate allies, with sales of about $150 billion, paying “no” corporate taxes for the 2010 tax year. That sort of thing is a result of “losses brought forward.” More such losses may be coming. The Fukushima nuclear reactor was a G.E. product.

Peter G. Malone

St. Charles