TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

A Member of the Law Professor Blogs Network

Wednesday, September 19, 2012

Bartlett: Some Big Corporations Don’t Pay Taxes, Either

New York Times:  Some Big Corporations Don’t Pay Taxes, Either, by Bruce Bartlett:

When poor people pay no federal income taxes and get a government refund because of such programs as the earned-income tax credit, Republicans are incensed, implying that if only the poor paid their fair share that the deficit would disappear. They never suggest that corporations like GE pay their fair share, even though the G.E. example is far from unique, according to Citizens for Tax Justice.

The complexity of the corporate income tax makes it easy to evade and avoid American taxes. Edward D. Kleinbard, a professor of tax law at the University of Southern California, points to the easy availability of tax havens, where corporations artificially book their profits and avoid taxation on them. ...

Republicans often point to the statutory corporate tax rate in the United States as evidence that American companies are overtaxed. Indeed, it is true that the United States has the highest statutory central government tax rate among members of the Organization for Economic Cooperation and Development. The combined statutory rate in the United States is 39.2%, including state taxes, compared with an average of 29.6% in the OECD.

However, as a Sept. 13 report from the Congressional Research Service explains, looking only at the statutory rate is highly misleading as an indication of the burden of the corporate tax. That is because it does not take account of the many tax expenditures that reduce the effective tax rate paid by American corporations. In 2011, they reduced corporate tax revenues by $159 billion.

As a consequence, the weighted effective tax rate – taxes as a share of profits – is 27.1% in the United States, which is below the 27.7% average rate of OECD. nations. The weighted average marginal tax rate on corporations – the tax on each additional dollar earned – is 20.2% in the United States, compared with 18.3% in the OECD. ...

The Congressional Research Service report also notes that in the United States corporate taxes as a share of GDP were the third lowest among all OECD. countries in 2009 – 1.7% of GDP (including state taxes), compared with an OECD average of 2.8% of GDP. ...

One driving force for tax reform is a widespread belief, on both sides of the aisle, that the statutory corporate tax rate should be reduced. That is fine as long as the tax base is broadened by eliminating loopholes. But the idea that cutting the tax rate is a magic bullet to jump-start growth is nonsense, because corporate taxes are, in fact, quite low.

(Hat Tip: Mike Talbert.)

http://taxprof.typepad.com/taxprof_blog/2012/09/bartlett--1.html

Tax | Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341c4eab53ef017d3c299f24970c

Listed below are links to weblogs that reference Bartlett: Some Big Corporations Don’t Pay Taxes, Either:

Comments