Congress, Justice, Politics, Society, Things That Tick Me Off

Corporate Tax Rate and Reality

Respectfully submitted by Lawrence Rafferty (rafflaw)-Guest Blogger

While we have discussed the fairness of the taxes paid and not paid by large corporations in the past, the alleged high corporate tax rate is once again in the news.  It seems that after contraception the Right’s most consistent accusation is that the corporate tax rate is way too high for corporations to compete in the world market. The facts seem to differ from those claims however.

“Corporations are lobbying for lower corporate rates and an exemption for profits they shift offshore. McIntyre, however, says “Our study provides proof that too many corporations are already being coddled by our tax system.” Findings in the report include:
 The average effective tax rate for all 280 companies in the study over the three year period was 18.5 percent; for the period 2009-2010 it was 17.3 percent, less than half the statutory rate of 35 percent.
 78 of the companies enjoyed at least one year in which their federal income tax was zero or less.
 30 companies enjoyed a negative income tax rate over the entire three year period on their combined pre-tax profits of $160 billion.
 Total tax subsidies given to all 280 profitable corporations amounted to $222.7 billion from 2008-2010.
 Wells Fargo tops the list of 280 U.S. corporations receiving the most in tax subsidies, getting nearly $18 billion in tax breaks from the U.S. treasury in the last three years.
 Pepco Holdings had the lowest effective tax rate of all the companies in the study, at negative 57.6 percent over the three year period.”  Citizens for Tax Justice 

If I understand those numbers correctly, large corporations are paying about half of the rate that they claim is too high.  Another example of how little these corporations are paying was recently discussed in a Crooks and Liars article on General Electric. “General Electric is a prime example of this trend. Despite being highly profitable and subject to a theoretical tax rate of 35 percent, GE paid only a 11.3 percent tax rate in 2011. And that number was the most they paid in more than a decade. In 2010, they actually paid no taxes and got a net tax benefit of $3 billion. For the 10 year period prior to that, their effective average tax rate was 2.3 percent.” Cooks and Liars

Recently, President Obama proposed a reduction in the corporate tax rate to 28 percent for many corporations while claiming to reduce or eliminate many tax loopholes. “President Obama will ask Congress to scrub the corporate tax code of dozens of loopholes and subsidies to reduce the top rate to 28 percent, down from 35 percent, while giving preferences to manufacturers that would set their maximum effective rate at 25 percent, a senior administration official said on Tuesday.  Mr. Obama also would establish a minimum tax on multinational corporations’ foreign earnings, the official said, to discourage “accounting games to shift profits abroad” or actual relocation of production overseas.”  New York Times

In light of the low actual rates paid already by these corporations, I don’t understand why the rate even needs to be reduced.  When General Electric pays an average of only 2.3% over ten years, what will they pay under Obama’s proposal?  I think the proposal to set a minimum tax is good in theory, but the devil is in the details.  I will believe it when I see it.

When politicians are screaming that corporations are people and should be allowed to deny their employees any insurance coverage for services that they have religious objections to, shouldn’t we make sure that they pay tax rates that Real people pay? How many workers were laid off or terminated while these profitable companies paid very little, if any, taxes?  What are your thoughts?
(Disclosure: The author owns a small amount of shares in General Electric stock.)

 

133 thoughts on “Corporate Tax Rate and Reality”

  3. Should read….. that CAME from my posting friend………………….

  4. @ rafflaw – You probably already know this but:

    Arguing with a Republican is like playing chess with a pigeon.

    You could be the greatest player in the world, but the pigeon will still knock over all the pieces, crap on the board and strut around triumphantly.

    That same from my posting friend Frank C, NY

    1. Wow attack one personally( Pigeon-really) and ASS ume. First off I have never been a registered republican in my 37 years of voting eligibility. Time to leave this group of rational and fact based Lady’s and Gentlemen. Enjoy talking to yourselves and see how that helps you grow and learn.

  5. Tony,
    The GE rate was a ten year average. The oil companies had record profits during the period you are discussing. Read the linked report. You do not need to pull the 10k’s.

    1. Oil companies have special tax incentives related to depreciation and depletion allowances to offset for the huge risk in capitol expenditures. If you personally invested in an oil or gas well you could experience the same risk vs. benefit that the oil companies experience. You might lose it all or hit it big but if you are to be motivated to take this risk you need to know that if a few of the wells hit you will not need be killed by taxes in the good times because you are limited in your ability to deduct the loses in the wells that come up dry. Otherwise you will not drill!

      GE is a joke as an example of a US Private sector company since it is directly supported by the government outside of it’s tax position. TARP for a MFG company?? Special oil deals for its energy business unit???? No more of an example of a capitalist company then the quasi government agencies such as Fannie Mae and Freddie Mac.

    1. The progressive tax structure that all redistribution advocates love allows for lower tax rates with lower profits. So while these companies might have ended up profitable over the three year period they would not have a high Effective Tax Rate unless they had high profits all three years which none of these did…….Pull the 10K reports for yourself…….

  7. Wow you picked a three year period to base your study on 2008 to 2010 which happens to have been the worst economic conditions since the great depression. Of course the effective tax rates were down nobody was making $ during this period so you have a flawed study that basically is being used as propaganda by those who hate capitalism and free markets. Surprised-NOT!

  15. “Our Congress is so corrupt that it’s hard to figure how the country will survive unless a lot of them are replaced.” -Margaret Richards

    Margaret, I don’t have an online subscription to The Nation, so I can’t post the article… If you haven’t read it, there’s an article in the March 5/12 issue which is aptly titled, “the Treason of the Senate”…

  17. I’ve read article after article in recent months showing how very little, if anything, these corporations are paying. Some are receiving government subsidies. All seem to be paying the most brazen, outrageous salaries & bonuses to their CEO’s, etc., that one can imagine. The jobs are & have been leaving this country in huge numbers, all to further enrich these greedy vermin. Other countries are years ahead of us in infrastructure, railroads/trains, manufacturing & in health care. Here we sit with the old war lords in Congress doing the bidding of the corporations which make a fortune off the illegal wars/occupations which have killed, maimed, made hundreds of thousands homeless, while our country is falling apart at the seams.

    I am sick of the flag waving characters who call themselves patriots while voting against the best interest of the country as well as themselves. Our Congress is so corrupt that it’s hard to figure how the country will survive unless a lot of them are replaced.

    I cannot see giving these corporations any tax breaks. As a matter of fact their rate should be raised to 70% until they make up for all the scheming they have done to avoid taxes in the past & until this country is out of debt. The only thing they should be able to deduct is operating materials, employee salaries & health care for employees. Once the country is showing a surplus the rate could be reduced to 50% and left that way permanently. Now that’s the kind of austerity (corporate) that we should be practicing.

    1. Then I707…..if you’ll look up the number of registered lobbyists in DC or any state you find in DC alone there are 600 or something like that for every elected official…. Most of them corporate focused for what’s in their clients best interest….

  20. “Perfect description of our crazy, mixed up world today.”

    Margaret Mitchell,

    Ain’t it the truth…

    (Thanks for the lyrics… and great choice, eniobob…)

    Standing in for Lawrence Rafferty again… I think that I better go do something else… 😉

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