Could the Democrats’ New 15% Minimum Corporate Tax Be Any Less Important?
$300B raised over 10 years sounds big unless you compare it to Intel ALONE doing $130B in investor giveaways over the past 10 years. It’s kind of embarrassing that Democrats are thumping their chests this much over such a small thing.
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Democrats are pretty universally saying today how awesome they are at being close to completion on legislation that will raise $300 billion over the next 10 years through a 15% minimum corporate tax rate.
I mean, that sounds like a large number, right?
Maybe it does.
Until you put it in perspective.
Let’s do that. Let’s go get us some perspective.
Compared to investor giveaways like corporate stock buybacks, is $300 billion over the next 10 years a lot, or . . . maybe not so much?
(Spoiler alert — it’s small potatoes.)
Let’s look at just one company — Intel.
Over the 10-year period from 2011 to 2020, Intel had Net Income of $140 billion.
Above and beyond that $140 billion in *Net Income* over those 10 years, Intel ALSO blew another $130 billion in *investor giveaways* — $81 billion in stock buybacks and $49 billion in cash dividends.
Think about this.
Intel alone had an extra $130 billion laying around, and they couldn’t figure out anything better to do with it than to spray it indirectly to their investors via stock buybacks and directly to those investors via cash dividends.
$130 billion is 43% of the $300 billion that this 15% minimum corporate tax rate on all large companies is projected to raise over the next 10 years.
From. one. company.
It’s not a small company, to be sure — but Intel is far from the largest company in terms of profits over the past decade.
It didn’t even make the Top 25 list in 2021 of most profitable companies in the S&P 500.
Bottom line, the math works on all of this . . .
. . . but something really doesn’t add up in terms of the money that Congress is NOT going after.
It’s almost as though our senators and congressional representatives take so much money from corporations and the corruption is so pervasive that their primary responsibility is to corporations . . . instead of to the American people.
One closing thought
If you want to see heads explode in CEO suites, in corporate boardrooms, and in investment banks everywhere, stop allowing companies to buy back their own stock.
That’s it.
Just revert back to the way things were before Reagan got into full regulatory makeover mode.
And you will end up potentially raising 5 times as much money as the $300 billion Congress is backslapping over.
As recently as the 1981, a company buying back its own stock was illegal because it was considered stock price manipulation.
If we simply went back to the way things were in 1981, that would mean that Intel would have had another $81 billion in Net Income from 2011 to 2020. That alone would have meant $12 billion more in minimum corporate tax paid to the U.S. government from Intel. ($81B x 0.15 = $12.15B)
(Btw, in case you are wondering why I am using an $81 billion number here instead of the $130 billion number I mentioned earlier in the article — and good catch if you were — it’s because $81 billion is the 10-year stock buyback number for Intel. $130 billion is the 10-year number for stock buybacks AND cash dividends.)
Now imagine if all of the money being used for stock buybacks right now across all of Corporate America were subject to this tax instead of flowing out of companies to investors.
According to Harvard Business Review:
“…In 2018 alone, with corporate profits bolstered by the Tax Cuts and Jobs Act of 2017, companies in the S&P 500 Index did a combined $806 billion in buybacks, about $200 billion more than the previous record set in 2007. The $370 billion in repurchases which these companies did in the first half of 2019 is on pace for total annual buybacks that are second only to 2018. When companies do these buybacks, they deprive themselves of the liquidity that might help them cope when sales and profits decline in an economic downturn….” (Why Stock Buybacks Are Dangerous for the Economy, January 07, 2020)
A 15% minimum corporate tax on the $806 billion in stock buybacks FROM 2018 ALONE would have amounted to about $121 billion in tax revenue.
If you multiply by 10 that $121 billion in tax revenue from 2018 to see what getting rid of stock buybacks might generate in tax revenue over a 10-year period, that’s $1.2 TRILLION in tax revenue over 10 years.
Add that $1.2 trillion to the $300 billion that is already projected to be collected. That’s $1.5 trillion.
Now, compare $1.5 trillion to the $300 billion.
If the Dems were to change the law back to what it was prior to when the SEC under Ronald Reagan in 1982 instituted Rule 10b-18 of the Securities Exchange Act allowing stock buybacks, they would raise FIVE TIMES AS MUCH TAX REVENUE as this $300 billion via the 15% corporate minimum tax that they are all hyperventilating over.
“A minimum corporate tax so inconsequential that it’s not enough for Corporate America to really care about.”
– brought to you by the Bought Congress of 2022
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