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.

About 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."

To 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.
There 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.
One 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 "arms-length" prices.

Adam Hughes, director of federal fiscal policy at OMB Watch, a nonpartisan government accountability watchdog, explained how transfer pricing works.

"A 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 tax-free haven."

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 at length.

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.

"In 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.
But, 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.

Data 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 in 2004."

Read more: http://www.sfgate.com/news/article/Most-U-S-firms-paid-no-taxes-over-7-year-span-3200840.php#ixzz27LUaTJSn