A Modest Change To The Coronavirus Stimulus
Many Americans are understandably outraged that corporations are being awarded $500 billion directly plus up to four trillion more in backchannel funding in the coronavirus stimulus plan. As a way to improve the bill and protect the American people, the U.S. Senate (aka "we work for them, not you") should add my modest change to the bailout plan.
The concept is simple and requires just a one line addition: Any corporation receiving a government loan or loan guarantee must have paid Federal income tax in 2018.
How would this work out for some of our favorite corporations? None of the following would be eligible for assistance because they all paid no tax but instead received refunds. And there are many other corporations that paid $0 or got refunds.
On October 15, 2018, the Department of the Treasury released its tally of budget totals for fiscal year 2018. In that report, they showed that corporate income tax receipts fell from $297 billion in 2017 to $205 billion in fiscal year 2018 — a 31 percent drop. Such a large year-over-year drop in corporate income tax revenue is unprecedented during a time of economic growth.
The 31 percent drop in corporate income tax receipts last year is the second largest since at least 1934, which is the first year for which data are available. Only the 55 percent decline from 2008 to 2009 was larger. While that decrease can be explained by the Great Recession, the drop from 2017 to 2018 can be explained by tax policy decisions.
The Tax Cuts and Jobs Act, enacted in December 2017, is responsible for the plunge in corporate income tax receipts in 2018. Those changes include a reduction in the statutory rate from 35 percent to 21 percent and the expanded ability to immediately deduct the full value of equipment purchases.
Tax receipts from corporations ticked up in FY 2019 to $230 billion from the previous year's $205 billion, largely due to repatriated foreign corporate earnings and timing shifts driven by the 2017 tax act.