2/3 of United States corporations paid no federal income taxes from 1998-2005
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August 13, 2008
Study Tallies Corporations Not Paying Income Tax
By LYNNLEY BROWNING
Two out of every three United States corporations paid no federal income taxes from 1998 through 2005, according to a report released Tuesday by the Government Accountability Office, the investigative arm of Congress.
The study, which is likely to add to a growing debate among politicians and policy experts over the contribution of businesses to Treasury coffers, did not identify the corporations or analyze why they had paid no taxes. It also did not say whether they had been operating properly within the tax code or illegally evading it.
The study covers 1.3 million corporations of all sizes, most of them small, with a collective $2.5 trillion in sales. It includes foreign corporations that do business in the United States.
Among foreign corporations, a slightly higher percentage, 68 percent, did not pay taxes during the period covered — compared with 66 percent for United States corporations. Even with these numbers, corporate tax receipts have risen sharply as a percentage of federal revenue in recent years.
The G.A.O. study was done at the request of two Democratic senators, Carl Levin of Michigan and Byron L. Dorgan of North Dakota. In recent years, Senator Levin has held investigations on tax evasion and urged officials and regulators to examine whether corporations were abusing tax laws by shifting income earned in higher-tax jurisdictions, like the United States, to overseas subsidiaries in low-tax jurisdictions.
Senator Levin said in written remarks on Tuesday that “this report makes clear that too many corporations are using tax trickery to send their profits overseas and avoid paying their fair share in the United States.”
But the G.A.O. said that it did not have enough data to address the role of what some policy experts say is a crucial factor in profits sent overseas.
That factor, known as transfer pricing, involves corporations’ charging their overseas subsidiaries lower prices for goods and services, a common move that lowers a corporation’s tax bill. A number of corporations are in transfer-pricing disputes with the Internal Revenue Service.
Either way, the nearly 1,000 largest United States corporations were more likely than smaller ones to pay taxes.
In 2005, one in four large United States corporations paid no taxes on revenue of $1.1 trillion, compared with 66 percent in the overall pool. Large corporations are those with at least $250 million in assets or annual sales of at least $50 million.
At a basic corporate tax rate of 35 percent, all the corporations covered in the study in theory owed $875 billion in federal income taxes. But because the tax code allows corporations to claim legally an array of deductions, write-offs, operating losses and tax credits, the actual taxes paid were much lower.
Joshua Barro, a staff economist at the Tax Foundation, a conservative research group, said that the largest corporations represented only 1 percent of the total number of corporations but more than 90 percent of all corporate assets.
The vast majority of the large corporations that did not pay taxes had net losses, he said, and thus no income on which to pay taxes. “The notion that there is a large pool of untaxed corporate profits is incorrect.”
In 2004, a G.A.O. study said that 7 in 10 of all foreign corporations doing business in the United States, or foreign-controlled corporations, paid no taxes from 1996 through 2000, compared with 6 in 10 United States corporations.
http://www.nytimes.com/2008/08/13/business/13tax.html?partner=rssyahoo&emc=rss
Nice...
Study Tallies Corporations Not Paying Income Tax
By LYNNLEY BROWNING
Two out of every three United States corporations paid no federal income taxes from 1998 through 2005, according to a report released Tuesday by the Government Accountability Office, the investigative arm of Congress.
The study, which is likely to add to a growing debate among politicians and policy experts over the contribution of businesses to Treasury coffers, did not identify the corporations or analyze why they had paid no taxes. It also did not say whether they had been operating properly within the tax code or illegally evading it.
The study covers 1.3 million corporations of all sizes, most of them small, with a collective $2.5 trillion in sales. It includes foreign corporations that do business in the United States.
Among foreign corporations, a slightly higher percentage, 68 percent, did not pay taxes during the period covered — compared with 66 percent for United States corporations. Even with these numbers, corporate tax receipts have risen sharply as a percentage of federal revenue in recent years.
The G.A.O. study was done at the request of two Democratic senators, Carl Levin of Michigan and Byron L. Dorgan of North Dakota. In recent years, Senator Levin has held investigations on tax evasion and urged officials and regulators to examine whether corporations were abusing tax laws by shifting income earned in higher-tax jurisdictions, like the United States, to overseas subsidiaries in low-tax jurisdictions.
Senator Levin said in written remarks on Tuesday that “this report makes clear that too many corporations are using tax trickery to send their profits overseas and avoid paying their fair share in the United States.”
But the G.A.O. said that it did not have enough data to address the role of what some policy experts say is a crucial factor in profits sent overseas.
That factor, known as transfer pricing, involves corporations’ charging their overseas subsidiaries lower prices for goods and services, a common move that lowers a corporation’s tax bill. A number of corporations are in transfer-pricing disputes with the Internal Revenue Service.
Either way, the nearly 1,000 largest United States corporations were more likely than smaller ones to pay taxes.
In 2005, one in four large United States corporations paid no taxes on revenue of $1.1 trillion, compared with 66 percent in the overall pool. Large corporations are those with at least $250 million in assets or annual sales of at least $50 million.
At a basic corporate tax rate of 35 percent, all the corporations covered in the study in theory owed $875 billion in federal income taxes. But because the tax code allows corporations to claim legally an array of deductions, write-offs, operating losses and tax credits, the actual taxes paid were much lower.
Joshua Barro, a staff economist at the Tax Foundation, a conservative research group, said that the largest corporations represented only 1 percent of the total number of corporations but more than 90 percent of all corporate assets.
The vast majority of the large corporations that did not pay taxes had net losses, he said, and thus no income on which to pay taxes. “The notion that there is a large pool of untaxed corporate profits is incorrect.”
In 2004, a G.A.O. study said that 7 in 10 of all foreign corporations doing business in the United States, or foreign-controlled corporations, paid no taxes from 1996 through 2000, compared with 6 in 10 United States corporations.
http://www.nytimes.com/2008/08/13/business/13tax.html?partner=rssyahoo&emc=rss
Nice...
My whole life
was like a picture
of a sunny day
“We can complain because rose bushes have thorns, or rejoice because thorn bushes have roses.”
― Abraham Lincoln
was like a picture
of a sunny day
“We can complain because rose bushes have thorns, or rejoice because thorn bushes have roses.”
― Abraham Lincoln
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Comments
Not that the corporation should be paying 0...or should they?
It's a fine line...tax incentives to help create jobs...if you tax them, they will move.
And since you pay taxes, don't you think it's only fair corporations pay some as well?
...are those who've helped us.
Right 'round the corner could be bigger than ourselves.
No - I think it's only fair if I don't pay taxes either.
...are those who've helped us.
Right 'round the corner could be bigger than ourselves.
That's the thing I don't really get about the complaints about outsourcing. Why makes a guy working for an addidas factory in China more deserving of a job then a guy from Vietnam?
I think it's the moving of the jobs...the Chinese guy isn't more deserving in your example, but he has worked and helped hte company, and then they just up and move to a new locale, leaving him with what?
Sure, they paid him every day for his work, but people aren't machines, and they shouldn't be treated merely as commodoties.
But doens't the fact that they are giving an unemployed Vietnamese guy a job kind of balance that out?
Our government is the potent, the omnipresent teacher. For good or for ill, it teaches the whole people by its example. Crime is contagious. If the government becomes a law-breaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy. - Louis Brandeis
The point is - why look at it from only one angle?
...are those who've helped us.
Right 'round the corner could be bigger than ourselves.
But isn't the employee free to leave at anytime? If so, why can't the company?
And I've never understood either why a human being in Mexico is less deserving of a job than a human being in the U.S. As long as someone's getting the job, what does it matter (unless it's you personally who lost the job).
...are those who've helped us.
Right 'round the corner could be bigger than ourselves.
I think its sad that we no longer respect the tradition of our forebearers and the customs that surrounded corporate law, and even Taft's original proposal for what became the 16th amendment.
That tradition held that the ONLY taxable form of income was that of the corporation ... and yet today we have totally lost our way.
If our society threw off the false dogma of the narrowly defined status quo version of "globalism" and went back to some common sense, we'd be in a better way. Effectively charging a premium on the corporate ownership structure (and here i would very possibly like to see S-Corps exempted from income tax as well) forces the market to take in to account the priority and supremacy of man over a legal fabrication.
As this assessment reckons the equation, you will see a transfer of business capital and prosperity back over from the tight confines of mega-corporate holdings in to the hands of small business and the citizenry at large.
Possibly more importantly, it returns us to accord with the constitution itself, and the value of upholding personal labor as a soverign RIGHT of man, not to be infringed. My right to exchange labor for value is provided by providence. The ability to incorporate is but a privelage. The magnitude of this discrepancy should better be observed by freedom loving people.
-my2cents-
If I opened it now would you not understand?
1) Yes, they do, I think in many cases it's bad form...just like when some employees leave.
2) It's not about being any less deserving...let me put it this way...you get married...spend 20 years buiding a relationship, working hard at it...then your spouse up and leaves you for a younger, more exotic person...
The new person is no less deserving of a loving relationship then the first, but it still kinda stinks to walk out on someone...and sure you got your reward all those years during the good times, but you thought you were building a lasting future.
I've worked for many wealthy families and some have mega yachts and they skeem to have these yachts based outside of the the US. Mainly the Bahamas, many will fly that flag over a US flag just to avoid the many taxes they would normally have to pay if they based that yacht out of the US.
These are NOT poor people these are yachts easily over a 100 ft and cost well we could retire tomorrow and not have to worry about working again ever.
Peace
*MUSIC IS the expression of EMOTION.....and that POLITICS IS merely the DECOY of PERCEPTION*
.....song_Music & Politics....Michael Franti
*The scientists of today think deeply instead of clearly. One must be sane to think clearly, but one can think deeply and be quite INSANE*....Nikola Tesla(a man who shaped our world of electricity with his futuristic inventions)
This is all you need to know.
There are a number of legal ways of tax avoidance. Corporations that post large losses have the option to defer those losses across multiple years, which can decrease their tax burden dramatically.
Those who cook the books and avoid taxes illegally should go to jail, no question. But it's not clear that is the case in that study. And when a corporation has losses, it SHOULD be allowed to defer them otherwise it would have to pay taxes on an unrealistic amount.
-Enoch Powell
Who would pay for your beloved wars?
But look at it from the point of view of the person you get left for. They look at you with not only the great relationship, but you also have a bunch of other things they don't have. It must sure stink for them to have neither the nice relationship or the nice house or the nice car (if we want to expand the analogy).
I'm anti-war and that fits my point exactly. With less tax money, the government has more trouble waging war. I don't understand why we're all not fighting to lower taxes across the board.
...are those who've helped us.
Right 'round the corner could be bigger than ourselves.
Don't consumers end up paying all the tax corporations would pay anyway?
The people who hold assets of any corporation are all individuals, they pay income tax or capital gains and then on the other end the embedded tax in the cost of the good. Right?
Everybody pays for any corporate tax because it's incorporated into the cost of thier product as I see it anyway.
I don't think wage is the determining factor in all corporate decisions either though it does seem that way sometimes. Tax structure, Quality, Shipping Costs, Value to the corporation etc. Sure I can buy crap in a box from china that I know will break in less than a year, but I'd much rather buy a quality unit from somewhere else.
In the sneaker market along with supermarket food in some instances I'm sure the cheapest possible production costs are key, but I don't think it's the deciding factor in all industries. They certainly are good at marketing as are drug companies so If they can convince people to spend $150 on $15 dollar shoes that says something about the consumer really. We have had many Japanese car companies move to the US, Pirelli tires just built a factory near where I live as did Kia Motors of Korea. Saving on shipping can increase their bottom line and allow them to still offer a price attractive to the customer. With energy skyrocketing, saving money on Labor doesn't have to mean moving a company to Laos, it might mean moving operations to Germany and Manufacturing to Alabama.
I think it depends on the needs of the corporation and the bottom line obviously. They might need highly skilled workers. They still are responsible to thier share holders many of which are just common people with pension plans and 401K's invested in their company dependent on their success for thier retirement.
this is what is so confusing to me about the UHC folks. you admit the government is very wasteful yet you want to give them hundreds of billions of more of your money to pay for "free" healthcare. I just dont get it.
YES.
...are those who've helped us.
Right 'round the corner could be bigger than ourselves.
Me either. I guess you can't analyze it using standard logic.
...are those who've helped us.
Right 'round the corner could be bigger than ourselves.