Fact Checking a Senator Bernie Sanders
September 16, 2014
Unlike other election years, in which social issues have tended to dominate the discourse, the upcoming election is largely focused around tax law – specifically corporate tax law. As a part of his campaign, independent Vermont Senator Bernie Sanders has been posting “memes” that include pictures of himself alongside memorable quotes.
This one in particular, which depicts Sanders holding an orange microphone, has garnered attention. The text reads, “Want to better understand why we have a federal deficit? In 1952, the corporate income tax accounted for 33 percent of all federal tax revenue. Today, despite record breaking profits, corporate taxes bring in less than 9 percent. It’s time for real tax reform.”
In terms of political efficacy, the meme is right on point. A growing sentiment in America says that the rich should be made to bear a higher tax burden in response to the massive wealth inequality experienced in the post-recession country. Concerns about corporate tax evasion, especially the hot-button issue of corporate inversions, could not be higher.
In short, the statement is sensational. This sensationalism led PolitiFact.com to verify the statement, resulting in a “mostly true” verdict. The Senator’s figures were almost exactly on the money, but two important factors cast doubt on the truth behind the statement’s meaning.
1. PolitiFact.com determined that the year was cherry-picked. In fact, 1952 was the third-highest year in history for corporate tax as a share of GDP, coming at a time when the U.S. was at the top of its game from an industrial perspective. That said, later figures show a smaller, but still significant decline in corporate taxation as a share of GDP.
2. The rise of “pass-through” organizations changed the shape of the corporate taxation landscape. Because of changes in tax rates and rules, many businesses now pass all profits onto shareholders or investors, meaning that no corporate income tax is collected. These shareholders must still pay taxes individually, further skewing the trend away from corporate income tax.
This week Senator Bernie Sanders made the news with this comments on tax reform. As tax attorneys both Frank L. Brunetti and I have written extensively the current state of tax reforms in the U.S. Check out the lastest posts and get the full scoop: