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US Tax Discrimination Against Large Corporations Should Be Discarded

  • Gary Clyde Hufbauer


    (Peterson Institute for International Economics)

  • Martin Vieiro


    (Peterson Institute for International Economics)

Public opinion holds that large corporations should pay a higher statutory tax rate than other business firms, and enjoy fewer deductions in computing their taxable income. Americans and their representatives in Congress have long entertained the notion that a corporate check paid to the US Treasury means "somebody else" pays the tax, conveniently forgetting that the money has to come from someplace. As the law is now written, the largest corporations (those with assets of $2.5 billion or more) pay about three-fourths of US corporate income taxes, even though they account for just 57 percent of corporate net income. Discriminatory tax burdens on one group of firms drive scarce capital and entrepreneurial energy to less productive firms, penalizing the entire economy. If the targets of discrimination are the nation's largest firms (the norm in the United States) the country will find it harder to compete on a global scale in industries that require dedicated research for decades, industries that exhibit huge scale economies, and industries that network across national borders. Whatever the relative contribution of large and small companies to gross or net job growth, the bottom line for American workers—and the American economy as a whole—is that it is important to ensure that the United States remains a favorable location for US-based multinational corporations to do business.

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Paper provided by Peterson Institute for International Economics in its series Policy Briefs with number PB11-16.

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Date of creation: 2011
Date of revision:
Handle: RePEc:iie:pbrief:pb11-16
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  1. Jerry Hausman & Ephraim Leibtag, 2005. "Consumer Benefits from Increased Competition in Shopping Outlets: Measuring the Effect of Wal-Mart," NBER Working Papers 11809, National Bureau of Economic Research, Inc.
  2. Gary Clyde Hufbauer & Paul Grieco, 2005. "Reforming the US Corporate Tax," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 3845.
  3. Kelly D. Edmiston, 2007. "The role of small and large businesses in economic development," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 73-97.
  4. Gary Clyde Hufbauer & Woan Foong Wong, 2011. "Corporate Tax Reform for a New Century," Policy Briefs PB11-2, Peterson Institute for International Economics.
  5. John Haltiwanger & Ron S. Jarmin & Javier Miranda, 2010. "Who Creates Jobs? Small vs. Large vs. Young," Working Papers 10-17, Center for Economic Studies, U.S. Census Bureau.
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