Most companies in US avoid federal income taxes

[Sporkman]

Most companies in US avoid federal income taxes - Yahoo! News

Most companies in US avoid federal income taxes

By JENNIFER C. KERR, Associated Press Writer 41 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.

[MonkeyMama]

I think this is rather deceiving.

I work in the area of small business and no, most small businesses don't pay corporate taxes. As the article states, most of these businesses "pay taxes under individual tax codes."

S Corporations do not have a federal income tax. & most of our C-corps choose to pay out all the profits to the owners. Partially because the individual income tax rates are very slightly preferable (& not even preferable for everyone - not those in the highest brackets). But it's not all about taxes. It just doesn't make sense to leave all the profits in most of these small corps. They don't have big capital expenditures, etc.

All the income IS taxed to the owners, in these cases, on their individual tax returns.

Anyway, I would be far more curious how many giant corporations were avoiding taxation with tax loopholes tailored to them.

Leave the little companies out of it. I roll my eyes when the little companies get lumped in with the big guys. I am really curious how these numbers would change if they took out the little guys. I am sure the numbers would still be staggering. But they would look very different.

I can assure you those who pay 45% income taxes, between fed and state, are paying their fair share. Their deductions are largely rents and employee salaries. Not a lot of loopholes for the "little guys." Some of these little guys have revenues in the millions, but doesn't mean they don't have a ton of overhead. Likewise, I wish the government would come out with useful data. Just because you have billions in revenues doesn't mean you made a dime of profit.

& to be fair, I agree as a whole with the article. I think more big corporations need to pay their fair share. For sure. But the numbers and the angle of this particular article just don't add up.

[jIM_Ohio]

86.9% of all statistics are useless.

This article is not included with the other 13.1%

[PrincessPerky]

The stats are prolly wrong but I bet plenty of big corps don't pay a fair share..now as a libertarian they are making jobs..and paying taxes that way...

but as a tax paying bloke.."If I have to pay you aught to pay!"