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”

  2. “…..so you have a flawed study that basically is being used as propaganda by those who hate capitalism and free markets. Surprised-NOT!”
    ——————————————-
    please show me just 1 free market…….just 1……!

  3. “Corporations should have to pay their taxes. Period. No loopholes. No subsidies. If a company like GE posts a $14 billion dollar profit? They should pay 28% of that in taxes. Not zero, which is what the did. In fact, they got money back in the form of subsidies. Why should corporations have to pay taxes? Because that’s fair. Allowing them to avoid paying taxes? Is the exact same net effect as a subsidy.”~Gene H.
    ————————————————————-
    And add to that, the effect of paying poverty wages to thier workers who then need medicaid or other public assistance to merely survive. They are getting subsidized at ALL ENDS of the great spaghetti noodler…

    The mACRO and the micro of these ‘big dogs’ differ little…

  4. Tony1, March 4, 2012 at 8:21 pm
    ——————————————
    Tony I’d love to see a study from your perspective….change only the time frame in the study and get back with…..

  9. Lotta,

    Good stuff. Make the corp vs our contributions clear.
    What about the one-percenters claim that they pay NN percent of federat taxes (on finance profits ??) and 48 percent of people pay no fed tax?
    Not a point. Am really wondering if you can make some figures that take away their argument.

    (Of course I would reply to them, your system and your finance wins are based on 48 per cent are held as marginal persons and are at the poverty line—–where is their pursuit of happiness. But have no facts.)

  10. Tony,
    “…..so you have a flawed study that basically is being used as propaganda by those who hate capitalism and free markets. Surprised-NOT!”

    You complain of personal attacks. Is the above anything other than a personal attack claiming he produces flawed studies for the purpose of providing propaganda to those who hate capitalism, etc.? I think not.

    First of all, I haven’t noticed any haters of capitalism and free-markets.

    However there are many who don’t like the tyranny associated with them, which is a natural consequence of the solutions they find with competition and vertical structures. Cheap buy, at the cost of “rape and pillage” economic tactics impoverishing the supply land, and market control and dominance through manufactured hegemonies and monopolies.

    To go through it all would be a lot ot work; and doubt if the pigeon would not still knock over the pieces. (Thanks Margeret).

    Come back when you’ve loosened up and opened your eyes.

  13. As long as the rates are low and can be further lowered by offshore incorporation without a rise in tariffs/surtax for access to the US market the US will continue to run up enormous deficits. The corporate tax rate is a joke.

    Current tax breakdown with definitions:

    http://www.pgpf.org/Special-Topics/Taxes-primer.aspx

    ——-
    http://www.ritholtz.com/blog/2011/04/corporate-tax-rates-then-and-now/

    Corporate Taxes as a Percentage of Federal Revenue
    1955 . . . 27.3%
    2010 . . . 8.9%

    Corporate Taxes as a Percentage of GDP
    1955 . . . 4.3%
    2010 . . . 1.3%

    Individual Income/Payrolls as a Percentage of Federal Revenue
    1955 . . . 58.0%
    2010 . . . 81.5%

  15. raff,

    I merely cast a blow in passing. You administered the thumping proper with your fine article. Good show.

  16. Gene,
    You beat me to the punch. I agree that corporations should pay a true minimum rate of taxes. End all subsidies.

  17. “crate some jobs in the process.”

    Careful there, Jack. Your Freudian slip is showing.

    Corporations should have to pay their taxes. Period. No loopholes. No subsidies. If a company like GE posts a $14 billion dollar profit? They should pay 28% of that in taxes. Not zero, which is what the did. In fact, they got money back in the form of subsidies. Why should corporations have to pay taxes? Because that’s fair. Allowing them to avoid paying taxes? Is the exact same net effect as a subsidy. If I personally made $14 billion dollars, I’d have to pay taxes on it and I’d gladly do so. Why? Because not only is it fair, I’d still have $10.8 billion dollars. Greed is not a valid reason to allow corporations to take a pass on taxes. Excess profit is not a valid reason to allow corporations to take a pass on taxes. History has shown when you do this, they don’t reinvest the money. They don’t create new jobs. Those kinds of expenses are allowed to be written off and they don’t pay taxes on them anyway. They either sit on the corporate profits on it as capital surplus or they take it personal profits by paying it out as bonuses and perks.

  19. So why 60 minutes spend the time doing a piece on tax shelters, focusing on Ireland and switzerland that pull high paying jobs away from the US simply due to favorable tax rates? Particularly in a turbulent economy, it is no surprise that here are fewer taxes where companies can rlwrite off losses. On its no surprise that when big government starts picking favorites, subsidies fly. We are better of getting rid of the Solybdra type corruption, and reduce corporate taxes to 0. Because corporations will either spend the money tough wages or dividends, taxes on those monies will always get collected anyway. Might as well crate some jobs in the process.

Comments are closed.