The Amount Of Crap About Tax Rates Is Staggering!! The Republicans Continue Babbling About Cutting The Income Tax Rates, But That Is Meaningless!! If You Don't Actually Pay Income Taxes, It Doesn't Matter What The Rate Is Because 0% Of Any Number Is Still Zero!!
General Electric and Wells Fargo Bank, just to mention two big ones, pay NO income taxes and haven't for years. Here is the rest of the story.
When the taxman cometh, most corporations wave him on by, according to a government study released on Tuesday.
two-thirds of U.S. companies and foreign firms doing business in this
country paid no federal income taxes from 1998 to 2005, according to a
study by the Government Accountability Office. Sen. Byron Dorgan, D-N.D., called the report "a shocking indictment of the current tax system."
be sure, many of the nonpayers were small or new companies that
probably made no money. But the report said that about a quarter of
large corporations - ones that had more than $250 million in assets or
$50 million in gross receipts - paid no taxes. In 2005, for instance,
3,565 large U.S. companies and 998 large foreign-owned companies
operating here did not pay any income taxes.
The report neither identified any companies nor specified how they avoided tax liability.
are numerous legal ways a corporation can duck taxes. The most obvious
one: If you don't make money, you don't have to pay taxes. Companies
also can write off previous years' losses, get tax exemptions for a
plethora of expenses, use R&D credits, even wipe out tax liability
when their employees exercise stock options.
But corporations can do a lot of creative accounting to "lose" money - and sometimes that can cross the line.
such practice identified by the report is "transfer pricing abuse."
Essentially, that means shuffling money among corporate subsidiaries by
charging pumped-up fees for goods and services instead of market-rate
Adam Hughes, director of federal fiscal policy at OMB Watch, a nonpartisan government accountability watchdog, explained how transfer pricing works.
company will incorporate offshore where there are no taxes," he said.
"That (parent) company charges the U.S. company lots of money for things
like the trademark for the company logo. The U.S. company says, 'I made
$50 million, but my stupid parent company charged me $50 million for
the logo.' The U.S. company gets to deduct the royalty fees as an
expense and move profits to the parent company offshore in a
In the years covered by the GAO report, a
greater percentage of foreign-controlled domestic corporations than U.S.
ones paid no taxes. Although the report did not draw conclusions about
the prevalence of transfer pricing abuse, it discussed the issue
The Tax Foundation,
a Washington, D.C., nonprofit that believes the tax system should be
simplified and rates reduced, said nothing in the report showed that
corporations are scofflaws.
"Even in a good year, a lot of firms are failing," said spokesman William Ahern. "General Motors
lost $10 billion in 2005, so how much corporate profit tax would you
expect them to pay? American Airlines lost almost a billion dollars.
What would you want them to pay when they're already cutting people?
They pay when they're profitable."
But don't corporations employ armies of accountants and lawyers to figure out every possible loophole?
There's nothing wrong with that, Ahern said.
that respect, they are just like individuals," he said. "Don't we all
fill out our tax returns as aggressively as we know how and take every
deduction and credit we're entitled to, even if they're unprincipled,
even if they're in the tax code only because Congress thinks we will
appreciate them for subsidizing us?"
Chris Edwards, director of tax policy at the libertarian Cato Institute in Washington, D.C., agreed that the report didn't prove that corporations are abusive or deceptive in their tax practices.
"It's common sense: Corporations don't earn profits in many years," he said.
Edwards added: "All that said, I think there probably is large tax
avoidance by U.S. multinational corporations, but in my view that's
driven by the very high U.S. corporate tax rate. A corporate tax rate
cut is long overdue."
On paper, the United States has the
second-highest corporate tax rate in the world. It comes to about 40
percent (the federal rate is 35 percent; the average of state and local
taxes adds on another 5 percentage points), putting it a notch behind
Japan. But the effective tax rate - what artful-dodger companies really
pay - is much lower than the nominal rate, critics charge.
"We have a pretty high nominal corporate tax rate, but effectively it's not high at all," said Lenny Goldberg, executive director of the California Tax Reform Association
in Sacramento. "There are many tax-avoidance strategies. We'd be far
better off with a simpler (structure) that made sure taxes were actually
paid by corporations."
In fact, despite its high nominal rate,
U.S. corporate taxes as a percentage of gross domestic product are lower
than in most other industrialized nations. From 2000 to 2005, revenue
from federal and state corporate income tax averaged 2.2 percent of the U.S. GDP, compared to an average of 3.4 percent in 30 of its trading-partner countries, according to the Treasury Department.
Peter R. Merrill, a principal at PricewaterhouseCoopers, wrote an article in the publication Tax Analysts, underscoring this paradox.
on corporate tax as a percentage of GDP "present a conundrum," he
wrote. "The United States has the second highest combined statutory
corporate tax rate among (the Organization for Economic Cooperation and
Development) countries, yet is tied with Hungary in raising the fourth
lowest amount of combined corporate income tax revenue relative to GDP