Globalization is creating two misleading impressions about corporate taxes in the U.S.
First, corporate-tax revenue is keeping up with recent historical averages as a share of gross domestic product. However, that's only because globalization has raised the corporate-profit share of GDP, while reducing the share of labor compensation.
Second, both Democrats and Republicans in Congress are committed to corporate-tax reform in response to globalization. Yet they are unlikely to accomplish much, because each party's desired reforms are pretty much the opposite of the other's.
Consider the state of corporate taxes. In the final quarter of fiscal year 2012, corporate income taxes amounted to 1.7 percent of GDP -- exactly their quarterly average over the past three decades. A closer look, though, reveals that this pattern reflects two contrasting trends.
The effective tax rate -- the share of corporate profits actually paid in taxes -- averaged 19 percent over the past three decades. That is much lower than the top corporate statutory rate, currently 35 percent, because of the various deductions and exclusions that corporations claim.
Over the past few years, this effective tax rate has plummeted. In the final quarter of fiscal year 2012, it was only 13 percent. That's not necessarily a problem, if it is temporary. About half the recent decline in effective rates, for instance, can be explained by the temporary bonus-depreciation provisions that have subsidized corporate investment, and expanded use of loss carryforwards.