By the Editors March 15, 2012
What should a company pay in federal income taxes? It’s a question legislators, lobbyists and candidates for political office have been debating for years, and their tone has only grown more rancorous with the renewed public interest in income inequality.
Business advocates argue that a low corporate tax rate promotes economic growth. More money means more hiring, they say. Their detractors point to research that suggests what a company pays in taxes does not significantly impact its hiring patterns. Whoever wins this argument in Washington will steer the top corporate tax rate, which is now set at 35%.
In fact, few companies pay the top corporate tax rate. In July 2008, the Government Accountability Office conducted a study to get a clearer picture of Corporate America’s effective tax liability (and to determine whether it was being impacted by a loophole known as transfer pricing abuse).
Among the GAO’s findings:
• From 1998 to 2005, 72% of large foreign companies and 55% of large U.S. companies reported no tax liability in at least one year.
• During the same period, 57% of large foreign companies and 42% of large U.S. companies reported no tax liability in at least two years.
• Roughly 80% of large foreign and U.S. corporations that reported no tax liability in 2005 also reported no taxable income.
• Small businesses are better at minimizing their effective tax rate.
Read the full study (PDF).
This entry was posted on Thursday, March 15th, 2012 at 12:30 am. It is filed under Tools & Resources and tagged with corporate taxes, GAO, income inequality, income tax, taxes. You can follow any responses to this entry through the RSS 2.0 feed.
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