U.S. Business Has High Tax Rates but Pays Less - NYT

[Bill USA]

http://www.nytimes.com/2011/05/03/business/economy/03rates.html">U.S. Business Has High Tax Rates but Pays Less


The United States may soon wind up with a distinction that makes business leaders cringe — the highest corporate tax rate in the world.

Doug Mills/The New York Times


Topping out at 35 percent, America’s official corporate income tax rate trails that of only Japan, at 39.5 percent, which has said it plans to lower its rate. It is nearly triple Ireland’s and 10 percentage points higher than in Denmark, Austria or China. To help companies here stay competitive, many executives say, Congress should lower it.

But by taking advantage of myriad breaks and loopholes that other countries generally do not offer, United States corporations pay only slightly more on average than their counterparts in other industrial countries. And some American corporations use aggressive strategies to pay less — often far less — than their competitors abroad and at home. A http://www.gao.gov/new.items/d08957.pdf">Government Accountability Office study released in 2008 found that 55 percent of United States companies paid no federal income taxes during at least one year in a seven-year period it studied.

The paradox of the United States tax code — high rates with a bounty of subsidies, shelters and special breaks — has made American multinationals “world leaders in tax avoidance,” according to Edward D. Kleinbard, a professor at the University of Southern California who was head of the Congressional joint committee on taxes. This has profound implications for businesses, the economy and the federal budget.
(more)

[JohnWxy]

1. important info to be used in posts on M$M sites.

recommended!

[Igel]

2. Useful quote. If only because it's meaningless.

"A Government Accountability Office study released in 2008 found that 55 percent of United States companies paid no federal income taxes during at least one year in a seven-year period it studied."

Most companies are small. Most small companies fail over 10 years. Many others--take the one I worked for for a year--suffer loses in their first year or two of business as they increase revenue and shake out the problems in production, sales, and supply lines. They suffer losses, they have no profits or net income to tax. The period studied in the GAO survey included a recession, by the way.

Moreover, it just says that companies paid no federal income taxes during at least one year. It doesn't say that paid no federal incomes taxes for multiple years. You can't tell if that means most companies paid no taxes for 7 years or every company paid taxes for at least 5 years--or something in between.

Then there's the caveat, "federal income taxes." This is a big deal when it's pointed out that 42% of households in 2009 or 2010 (I forget the year) paid no federal income tax. "But there are other taxes, like FICA, and state income tax, and property taxes, sales taxes, fees, the temporary tax reductions and refundable tax credits under the 2009 stimulus, etc., etc." It causes outrage that such "contributions" are ignored when we defend those we empathize with; when we ignore such contributions of the part we can't empathize with it's a good thing. (This reduces empathy, a virtue, to mere bias.)

I wonder if 55% of households over the course of the same 7-period failed to have a net federal income tax liability for at least one year? I wonder who in the federal government would be so crazy to commision or perform such a study?


What people want that statement to mean is that most companies that earned a profit on sales actually find some loopholes or special deductions to reduce their adjusted net income or their taxes owed to zero or less for a number of years during that 7-year period. We parse the statement to say that those we already believe are guilty of greed and corruption are greedy and corrupt, allowing us to say we're right in believing that those we believe are guilty of greed and corruption are greedy and corrupt ... ("The wheels on the bus go round and round, round and round, round and round....")

It doesn't mean that. It could, conceivably, mean that, but other interpretations are far more likely simply because we already know there's a large number of companies that lose money or pay no taxes for the same reason that individuals pay no income tax--no or very limited income (short or long term), reasonable kinds of deductions (short or long term), and so on.