Delaware, corporations, and the lie that is "Economic Patriotism"

Before you start reading this article, here's a teaser:  the man who just argued for a large dose of "economic patriotism" is US Treasury Secretary Jack Lew, who (ironically?) has made a career out of moving between government posts and ... representing Citigroup interests in the Bahamas, Cayman Islands, and Hong Kong tax sanctuaries.

The News Journal gets it wrong ... again.

Editorializing about the issue of "corporate inversion," that is, corporations like Walgreens ceasing to be American companies and moving their operations overseas for tax benefits, the WNJ says,

Corporations consider this action because of what they see as problems in the U.S. tax structure. The U.S. corporate rate can be as high as 35 percent, the highest among industrial nations.

OK, this is the standard party line for corporations, government, media, and both major political parties in Delaware, and it is oh-so-predictably followed by the rest of the corporate party line:

The most obvious solution would be to lower the tax rate. Congress should not come up with temporary fixes, such as tax holidays for repatriated profits. Instead, it should bring the rate into line with other countries.

First, let's be clear:  corporate tax rates (despite the nominal tax rate of 35%) are nowhere near that, because of all the tax breaks that corporations have purchased themselves.  Quoth the NYT on a General Accounting Office study:

Profitable corporations based in the United States had an effective federal tax rate of 13 percent on their worldwide income, 17 percent including state and local taxes.

Moreover, effective corporate tax rates have declined by about 30% over the past three decades:

According to the Internal Revenue Service, corporations had gross profits of $1.8 trillion in 2007 and taxable income of $1.2 trillion. Since the Tax Reform Act of 1986, new corporate tax preferences have widened the gap between gross income and taxable income. In 1987, gross corporate profits reported on tax returns were $328 billion and taxable income was $312 billion. Thus since 1987, taxable income has fallen to 68 percent from 95 percent of gross income. 

Dozens of the largest US corporations pay no taxes whatsoever when their tax liabilities are offset by the tax breaks, credits, and subsidies they receive: