Is it fair that many large corporations don't pay their fair share of taxes but still enjoy the resources that our nation offers to help them prosper?
According to Tim Dickinson of Rolling Stone, "Two-thirds of Americans believe large corporations should be paying higher taxes, and 80 percent believe corporate loopholes should be closed.
Roberto Ferdman, writing for Wonkblog, recently wrote about Burger King Worldwide Inc., the latest American corporation looking to move its headquarters or other assets out of America to avoid paying U.S. taxes. Burger King is moving its headquarters to Canada and reincorporating, a process described by Ferdman as "shifting its corporate citizenship." Ferdman reports that "more than 70 U.S. companies have reincorporated overseas since the early 1980s."
Of course, many American companies don't need to move their headquarters to lower their tax bill. Some stay and still pay nothing or very little at all. Citizens for Tax Justice studied the 2008 to 2012 tax records of 288 profitable Fortune 500 companies and found that they paid a "federal tax rate of just 19.4 percent over the five-year period; far less than the statutory 35 percent tax rate." They found that 33 percent of the 288 companies paid a federal tax rate below 10 percent. In addition, CTJ reported that 26 of the corporations in their study – such as Boeing, General Electric and Verizon – paid no federal income taxes during the five-year period of their study.
According to CTJ, the tax breaks or subsidies for the 288 companies in their study "totaled a staggering $364 billion." This additional revenue would certainly put a serious dent in the U.S. budget deficit.
"The sectors with the lowest effective corporate tax rates over the five-year period were utilities (2.9 percent), industrial machinery (4.3 percent), telecommunications (9.8 percent), oil, gas and pipelines (14.4 percent), transportation (16.4 percent), aerospace and defense (16.7 percent) and financial (18.8 percent)," according to the CTJ report.
Meanwhile, some politicians are trying to lower the maximum federal tax rate for corporations from 35 percent to 25 percent, believing that corporations would stop moving out of the country if their tax rates were lower. But the CTJ report found that, "Of those corporations in our sample with significant offshore profits, two thirds paid higher corporate tax rates to foreign governments where they operate than they paid in the U.S. on their U.S. profits." And remember, the average tax rate paid by the 288 Fortune 500 profitable companies (19.4 percent) was already significantly less than 25 percent after all the tax breaks offered to U.S. corporations.
Dickinson stated that, "Corporations paid nearly $100 billion less in federal income taxes last year than before the Great Recession – down nearly 40 percent as a share of GDP" even though "Profits were up $93 billion last year – to a high of $2.1 trillion, according to the Commerce Department. Yet corporate tax payments actually fell last year by more than $15 billion."
According to Americans for Tax Fairness, "Corporate taxes are near a 60-year low" and some companies that paid no taxes even received refunds from the U.S. government. For example, according to their report, FedEx made $6 billion over the last three years and didn't pay federal income taxes because the tax code subsidized its purchase of new planes at a cost to taxpayers of $2.1 billion. Doesn't FedEx use our roads and bridges, paid for by the rest of us, to deliver its packages? Don't they use our airports? Don't they benefit from our democracy? Clearly they and other corporations should contribute to our nation's operating expenses.
In a second example, according to Americans for Tax Fairness, "Verizon made $19.3 billion in U.S. pretax profits from 2008 to 2012, yet didn't pay any federal income taxes during the period." According to the report, Verizon received $535 million in tax rebates" which meant that their "effective federal income tax rate was negative 2.8 percent from 2008 to 2012."
We can certainly lower corporate taxes, but we should first get rid of all the loopholes and off-shore bank accounts so that everyone pays their fair share.
Tom Zirpoli writes from Westminster. His column appears Wednesdays. Email him at firstname.lastname@example.org.