do corporations pay their fair share of taxes?
By JENNIFER C. KERR, Associated Press Writer
1 hour, 49 minutes ago
WASHINGTON - Two-thirds of U.S. corporations paid no federal income taxes between 1998 and 2005, according to a new report from Congress.
The study by the Government Accountability Office, expected to be released Tuesday, said about 68 percent of foreign companies doing business in the U.S. avoided corporate taxes over the same period.
Collectively, the companies reported trillions of dollars in sales, according to GAO's estimate.
"It's shameful that so many corporations make big profits and pay nothing to support our country," said Sen. Byron Dorgan, D-N.D., who asked for the GAO study with Sen. Carl Levin, D-Mich.
An outside tax expert, Chris Edwards of the libertarian Cato Institute in Washington, said increasing numbers of limited liability corporations and so-called "S" corporations pay taxes under individual tax codes.
"Half of all business income in the United States now ends up going through the individual tax code," Edwards said.
The GAO study did not investigate why corporations weren't paying federal income taxes or corporate taxes and it did not identify any corporations by name. It said companies may escape paying such taxes due to operating losses or because of tax credits.
More than 38,000 foreign corporations had no tax liability in 2005 and 1.2 million U.S. companies paid no income tax, the GAO said. Combined, the companies had $2.5 trillion in sales. About 25 percent of the U.S. corporations not paying corporate taxes were considered large corporations, meaning they had at least $250 million in assets or $50 million in receipts.
The GAO said it analyzed data from the Internal Revenue Service, examining samples of corporate returns for the years 1998 through 2005. For 2005, for example, it reviewed 110,003 tax returns from among more than 1.2 million corporations doing business in the U.S.
Dorgan and Levin have complained about companies abusing transfer prices — amounts charged on transactions between companies in a group, such as a parent and subsidiary. In some cases, multinational companies can manipulate transfer prices to shift income from higher to lower tax jurisdictions, cutting their tax liabilities. The GAO did not suggest which companies might be doing this.
"It's time for the big corporations to pay their fair share," Dorgan said.
Government Accountability Office: http://www.gao.gov
- Anonymous1 decade agoBest Answer
Here's but one example.
Damn those liberals who want to tax mom'n'pop shops like McDonald's and Kraft out of existence!
Another useful article from Dollars and Sense:
- bookshop_ladyLv 61 decade ago
Maybe this fact has escaped your sensibilities, or maybe you've just never taken accounting or an unbiased economics course, but .... NO corporations pay taxes. Sure, the taxes are reflected as a line item on their income statement, and corps file a tax return and even send a check to the government. But every penny they pay in taxes was first added to the price of their product or service. Just like any other business expense, it is passed on to the consumer.
When a corporation faces rising labor costs, their prices go up. When gasoline prices increase and they pay more to ship their goods to market, they have to charge more for those goods. And when income taxes have to be paid on what the company has earned, the prices again go up. The company's bottom-line profits don't decrease, because they already raised their gross revenues to bring in the cash to pay the tax bill.
When corporate taxes get so high that a company can't continue to raise their prices to cover the taxes, companies move offshore or to a country with a more favorable tax code. Now, not only is the company not contributing to the coffers of the US federal government, but they've put a lot of people out of work. But they kept their product price low and can pass on the taxes to the consumers they have left.
None of this is good for any of us, whether tax payer or tax collector or revenue-generating corporation.
- abe frohmanLv 41 decade ago
must be nice to not have to worry about things like facts and critical thinking skills...
Please remember that 1/2 of all businesses in the US are mom and pop organizations that operate through an S corp. so it wouldn't be listed under this.
"An outside tax expert, Chris Edwards of the libertarian Cato Institute in Washington, said increasing numbers of limited liability corporations and so-called "S" corporations pay taxes under individual tax codes."
"There is a third explanation that has received relatively little attention, yet may be the single-most important answer to the corporate tax conundrum. In the United States, federal and state business and tax laws provide firms with considerable flexibility in the legal form of organization. Rather than organize as regular corporations subject to two levels of tax (at the corporation and the shareholder levels), businesses may organize as S corporations, partnerships, or limited liability companies that are not subject to entity-level tax. Since the Tax Reform Act of 1986, which lowered the top individual income tax rate below the top corporate tax rate, the share of taxable business income earned through passthrough entities (including sole proprietorships) has increased by 75 percent from 29 percent in 1987 to 52 percent in 2004 (see table). There is a large body of empirical evidence that confirms that corporate income tax rates that are high relative to individual income tax rates reduce the share of U.S. business activity conducted in corporate form"
Not only that taxes are often wiped out by losses or credits depending on the industry. Companies also increase the use of debt financing to use the interest expense to offset taxes.
For example - Exxon paid 9.3 Billion in taxes for the 2nd quarter.
- Michael SLv 61 decade ago
The only reason a C-corp wouldn't pay taxes is if it didn't make any profit. You'd be surprised how many corporations fall into this category. After buying inventory, paying off debt, paying workers, lawyers, accountants, and depreciating equipment, very little might be left for the owners.
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- Paul ELv 41 decade ago
Here's the biggest fraud that has been perpetrated on the American people by the "wealth envy" crowd for years.
Big corporations DO NOT PAY TAXES!
Big corporations, like small corporations, pass their tax bill on to the consumer in the form of higher prices.
When taxes are raised on BIG CORPORATIONS they raise prices.
If they can't raise their price then they cut costs by spending less, cutting benefits and laying workers off.
Raising taxes on corporations mean YOU pay more... DUH!
Why is this so hard to understand?
Because so many people are jealous of success and harbor a lot of wealth envy toward those that are more successful.
But keep in mind.
BIG CORPORATIONS DO NOT PAY TAXES.
PEOPLE PAY TAXES!
- the_meadowlanderLv 41 decade ago
Corporations shouldn't pay any taxes. Corporations aren't sentient beings. Only people can own things. Only people can have income. Corporations only exist as tax paying entities to hide the incomes of real people. If these large assets were assigned to the people that own them instead of to faceless corporations, then true tax accountability could be achieved.
- hoovartedLv 71 decade ago
Have the liberals brainwashed you to the point of no return?
What corporations pay taxes?
Have you ever noticed when a corporation raises their prices for their goods and services?
Higher taxes just means higher prices or less jobs.
- SplittersLv 71 decade ago
Does this imply they've been paying taxes since 2006? So since then, the Dems have taken over Congress and the economy has gone into the tank. Interesting.
- 1 decade ago
Not since Bush got into office.
- Anonymous1 decade ago