How American Companies Get Away Without Paying Tax

By: Liz Zuliani   Date: 7 June 2011

About The Author

Liz Zuliani

Diverse background in digital media, with experience working across large networks, to boutique

Liz Zuliani, EconomyWatch Contributor

 

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07 June 2011

Eric Cantor has represented a section of Richmond, Va., in Congress since 2001 and now is the House majority leader. He would like to craft a permanent U.S. tax system that caters exclusively to those at the top. 

Michele Bachmann, the Republican representative from Minnesota, a onetime tax lawyer who hopes to make a run for the White House.

Likewise, Tim Pawlenty, the former two-term Republican governor of Minnesota, who also sees himself sitting in the Oval Office. Needless to say, none state their proposals like that.  But that’s the way their numbers and provisions add up.

Like others in Congress and the media, Cantor, Bachmann and Pawlenty insist that American businesses are paying too much in corporate income tax.

They claim the onerous tax burden is killing jobs and forcing companies to move abroad. To reverse the nation’s fortunes, they say, all Washington need do is slash the corporate tax rate, thereby reducing the amount of taxes these businesses are forced to pay. What’s scary is a growing number of citizens believe them.

Infographic:How Corporations Are Getting Out Of Paying Taxes

William J. Casey, a wily Republican who helped craft the election of Ronald Reagan forecasted:

"We'll know our disinformation program is complete when everything the American public believes is false."

Corporate tax cutters are peddling the lie is that companies doing business in the United States are taxed at an exorbitant rate. This is not true.

The United States has one of the highest statutory rates at 35 percent, the only fair way to measure what companies actually pay is their effective rate, or what they pay after deductions, credits and assorted writeoffs. By that yardstick, companies in the United States consistently pay taxes at rates lower than corporations in Japan and many nations in Europe.

During the 1950s, corporations paid 49 percent of their profits in taxes. Last year, it was about half that rate, a decidedly more modest 26 percent. In 2010, corporate tax collections totaled $191 billion — down 8 percent from $207 billion as recently as 2000.

  • Corporate tax revenue in 2009 came to just 1 percent of gross domestic product — the lowest collection level since 1936, or three-quarters of a century ago.
  • In 2010, it edged up to 1.3 percent — the second lowest since 1940.
  • At the end of 2010, corporations posted an annualized profit of $1.65 trillion in the fourth quarter.

In other words, the more they made, the less they paid. As for the corporate share of total income taxes paid by businesses and individuals, it has plummeted from 40 percent in 1950, the dawn of Middle America’s golden age, to 18 percent last  year.

The corporate numbers also explain why hardworking Americans are on a greased downward slope from which they are unlikely to recover, as long as the lawmakers and dealmakers in Washington not only refuse to ease their plight, but also continue to pile on, compelling them alone to pay for the country’s massive deficit while simultaneously chipping away at their safety nets.

In 2008, the latest year for which statistics are available, individuals and families with incomes between $25,000 and $50,000 paid nearly $2,500 on average in individual income taxes — for a tax rate of 7.1 percent. Once again, because select corporations in America know the right people in Washington, they are doing better. Stupendously better, as attested to by documents filed with the U.S. Securities and Exchange Commission (SEC).

taxes_corp

Source: The President's Budget for Fiscal Year 2012 Graphic by Julie Snider, the Investigative Reporting Workshop

In its most recent filing, Exxon Mobil Corp., the global energy giant, reported  income of $34.8 billion before taxes on total revenue of $310.6 billion for 2009. Its U.S. income tax bill: Zero.

Exxon Mobil claimed a tax benefit of $838 million, while it paid $15.8 billion in income taxes to other countries.

General Electric Company showed income before taxes of $10 billion on total revenue of $155.3 billion. Like Exxon Mobil, GE reported no U.S. income tax paid.

Government statistics show, the United States has two tax systems: A flexible, preferential one for multinational corporations and the rich; a rigid, non-negotiable one for working people.

In other words, if you’re not lucky enough to be a global business or a wealthy individual, then you must pay pretty much what Congress dictates. If, however, you are among the privileged, your company makes billions for you and essentially operates tax-free.

Some corporations do pay the maximum 35 percent rate. Like individuals, these companies, often medium-sized domestic operations, are unable to make use of the accounting gimmicks available to multinational and select other businesses.

In short, corporate America does not come close to paying its fair share of government’s cost. Nor, obviously, is it called upon to make any human sacrifice. As for all those hundreds of billions, they simply were and are added to the national debt, a tab that will be borne disproportionately by working Americans.

Full story from America What Went Wrong.

 

 


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