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Apparently being a senator means never having to say you're embarrassed. Here is Sen. Dorgan and an AP story today on a GAO study on corporate income tax liabililty.

What Dorgan doesn't get, and what the story approaches but doesn't totally nail down, is that most corporations aren't liable for income taxes even if they make a gajillion dollars in profits. Their shareholders/partners/owners pay the taxes on their personal returns. The huge majority of the 65 percent or so of U.S. corporations that didn't pay income tax in 2005 are S corporations, which almost never pay income tax themselves. Take out the S corporations and only about a fourth of all U.S. companies didn't pay income tax in 2005 -- many because they didn't earn any profit, which has been known to happen. In a study that was supposed to compare U.S. tax liabilities between U.S. companies and foreign companies, why GAO decided to even count entities that are immune to income tax is a mystery. It does make for a snappier sounding lede in the AP story, however. UPDATE: The

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makes the same mistake.

Nowhere does it point out that most of the companies that didn't pay income taxes aren't even liable for income tax in any circumstances. UPDATE 2: Now it's my turn to be embarrassed. Tax Foundation economist Josh

Ritter

Barro says the NYT story is correct, if unclear. The "two out of three" U.S. corporations referred to in the lede are all C corporations, which ARE liable for income tax. GAO also measured S corps and REITs and other pass-through entities, but those aren't includes in the "two thirds" denominator. The fact that two-thirds of C corps aren't paying income tax is problematic, even if overall corporate income tax revenue is rising.

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