Tax Evasion More Profitable Than Producing Quality?
Most U.S. Corporations Paid No Income Tax At All During Boom Years
Income taxes are not the best way to get public revenue. But as long as we have them, income tax evasion by some shifts burdens to others. Innovation and effort should go into productive activities, not finding loopholes in tax laws. This report first appeared in the Guardian (UK).
by David TeatherAlmost two-thirds of American corporations paid no tax between 1996 and 2000 even as the economy was booming and corporate profits were reaching an all time high, according to a government report.
The study from the General Accounting Office, the investigative agency of Congress, will stir the fierce debate on taxation in the looming presidential election.
It suggests that tax avoidance has become ingrained in corporate America and the situation is getting worse.
The percentage of US-owned companies saying they owed nothing to the taxman during the study's timeframe grew moderately but steadily from 60.3% in 1996 to 63% in 2000.
Corporate dollars have fallen dramatically as a percentage of the overall tax base in the US, accounting for 7.4%, $132bn, of federal tax receipts in 2003. The figure is the second lowest on record and down from a post-war peak of 32% in 1952.
"Too many corporations are finagling ways to dodge paying Uncle Sam, despite the benefits they receive from this country," said Michigan Democrat Carl Levin. "When companies dodge taxes, it falls on average Americans to pick up the difference."
John Kerry, the presumed Democratic candidate, has rounded on the president for looking after special interests and targeting tax cuts at wealthy individuals.
He wants to put an end to US companies parking profits offshore to avoid paying tax. A spokeswoman for the senator said he "wants to make America more fair, so that average Americans don't have to pick up the tab for corporate-America profits".
The basic federal tax rate for large corporations in the US is 35%. But many of the companies use loopholes to reduce their bills. Perhaps the most notorious case is Enron, the failed energy firm that contributed to Cheney and Bush, which reported profits of $2.3bn to Wall Street between 1996 and 1999, while reporting a loss of $3bn to the IRS for the same time period!
Warren Buffett, the second wealthiest man in the world, recently delivered a searing criticism of corporate America for shirking its tax responsibilities.
Berkshire Hathaway, he noted, paid $3.3bn in tax last year, amounting to 2.5% of the total income tax paid by all US corporations. "Tax breaks for corporations [and their investors] were a major part of the administration's 2002 and 2003 initiatives. If class warfare is being waged in America, my class is clearly winning."
The absence of corporate tax dollars also feeds into the debate over the record-breaking budget deficits that have been run up by the Bush administration.
Also see this classic
Fred Foldvary on Corporate Income Tax and Shakespeare
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