Billionaire investor Warren Buffett says that it's a "myth" that high taxes are "strangling" U.S. corporations.
In a Monday op-ed for The Wall Street Journal, Republican presidential candidate Rick Santorum called for the corporate tax rate to be halved from 35 percent to 17.5 percent to "[r]estore America's competitiveness."
CNBC's Andrew Ross Sorkin asked Buffet what he thought the highest rate should be.
"What the rate should be are rates that bring in about 18.5 or so percent of GDP [gross domestic product] as revenue," the Oracle of Omaha explained. "The interesting thing about the corporate rate is that corporate profits, as a percentage of GDP last year were the highest or just about the highest in the last 50 years. They were 10 and a fraction percent of GDP. That’s higher than we’ve seen in 50 years."
He continued: "The corporate taxes as a percentage of GDP were 1.2 percent, $180 billion. That’s just about the lowest we’ve seen. So our corporate tax rate last year, effectively, in terms of taxes paid for the United States, was around 12 percent, which is well below those existing in most of the industrialized countries around the world."
"So it is a myth that American corporations are paying 35 percent or anything like it. Incidentally, 1.2 percent of GDP or 12 or so percent of corporate profits actually paid, that is a rate far, far, far below what we've seen in the United States. ... Corporate taxes are not strangling American competitiveness."
Earlier this month, The Wall Street Journal reported that corporations in the U.S. paid only an average of 12.1 percent in taxes on the profits they earned inside the U.S in fiscal 2011, according to statistics from the Congressional Budget Office (CBO).
It’s the lowest percentage corporations have paid on those profits since at least 1972, and it’s less than half of the 25.6 percent they paid on average between 1987 and 2008.
Corporations saw their profits, however, reach an all-time high at the end of 2010. The $1.68 trillion in annualized profits in the fourth quarter of fiscal 2010 beat the previous record of $1.65 trillion in the third quarter of 2006.
(H/T: Think Progress)