Tuesday, March 27, 2012

No, Greg Mankiw, We're Not, and You Know It

On his blog, Greg Mankiw provides his readers a rather deceptive bit of information:
The reason that is misleading is explained further down in the very same yahoo finance article he links to:
But despite the headline number, the statutory rate only tells part of the story.

Loopholes and other special treatment for different kinds of businesses mean that businesses pay an effective rate of only 29.2% of their income, which puts the United States below the average of 31.9% among other major economies, according to analysis by the Treasury Department.

And the Organization for Economic Cooperation and Development, the multinational group that tracks global economic growth, estimates the United States collects less corporate tax relative to the overall economy than almost any other country in the world.
I know Greg Mankiw knows that.  The headline marginal tax rates do matter, because they effect incentives, but his selective quote creates the false impression that the US corporations face an unusually large tax burden, when, by many measures, the effective corporate tax rate in the US is relatively low.

Here's another way to slice it - the share of corporate "operating surplus" paid in taxes - calculated by the US Treasury, via this CBPP report:
Yes, that's a few years old and many countries have been lowering corporate taxes, but I doubt its changed that much.  Corporate taxes are indeed a mess, though, and tricky to measure; this NY Times story is informative about some of the issues.

I'm a fan of much of Greg Mankiw's work and responsible for quite a few sales of his Intermediate Macroeconomics textbook.  I know he knows better - and would probably do an excellent job if he attempted an honest explanation of the issues associated with the US corporate tax code, and how it compares internationally.  Sigh.


Anonymous said...

You would not expect him to adhere to the truth when he sees an opportunity to tell a reactionary untruth, would you?

Anonymous said...

" because they effect incentives"

should be

" because they affect incentives"

Anonymous said...

I am sorry to say that, based on his recent writings, Mankiw currently is adviser to a Republican candidate with a side job of economics professor, rather than the opposite. My conclusion is that I should interpret whatever he writes nowadays as GOP propaganda rather than economic analysis. He should be frank and update the "About Me" on his blog to reflect this reality.

ProGrowthLiberal said...

Japan intends to have a slightly lower nominal corporate tax rate. OK, but doesn't the Obama White House also have a proposal to lower our rate to 28%? One would think the other political party would join this Administration in bipartisan support for lowering the US corporate tax rate. Oh wait - Republicans hate their own ideas when they are endorsed by this particular Democratic President. Never mind!

Anonymous said...

But you only included the first part of his piece. He does talk about the loopholes just below the segment you printed.

Average Reader said...

Anonymous (no. 4), you're looking at Chris Isidore's article that Mankiw's post linked to. Mankiw himself only posted the single paragraph reproduced in full at the top of this post. He didn't include any nuance or subtlety, just the headline rates. It was at best a pretty lopsided post, and it is fair to call him on it.

incunabular said...

Mankiw is NOT a blogger. He doesn't comment or editorialize. He doesn't engage. He doesn't allow comments. He doesn't respond to criticism. He just links to article, which we can surmise he has an opinion on - but he never says for sure. It's the worst kind of supposed "engagement" on social media. He's a vandal.