SHOCKING!! Most US Companies pay no taxes

[Erich]

I recently found the following article online and was shocked that the IRS and our tax system allows so many companies to get away with paying no taxes on their profits...


Most US firms paid no income taxes in '90s
More than half avoided levies during boom years

By Warren Vieth, Los Angeles Times

WASHINGTON -- More than half of US corporations paid no federal income taxes during the boom years of the late 1990s, and those that did were able to shelter much of their income, according to congressional accountants.

The report by the General Accounting Office raises questions about whether the corporate income tax burden is too light and distributed unequally. It could undermine arguments that US companies are overtaxed and provide ammunition to politicians and activists who claim companies are using loopholes to avoid paying their fair share.

"This describes a problem in the corporate tax system in which a good many of these companies are avoiding any tax obligation at all," said Senator Byron L. Dorgan, a North Dakota Democrat and former state tax commissioner who requested the GAO study. "We've got a bad tax law that tells ordinary folks, `You pay up,' and allows some of the largest enterprises to avoid paying."

The share of tax receipts paid by corporations has been declining for decades, US government figures show. But it has been falling at an even faster rate in many other countries, said Gary Hufbauer, senior fellow at the Institute for International Economics, and any attempt to raise corporate taxes or close loopholes in this country runs the risk of making US companies less competitive in world markets.

"When you get a report like this people think, gee, they're getting away with murder," he said. "But most of the murder they're getting away with was deliberately designed by legislatures in response to competitive concerns. This is the result."

The GAO report showed that 61 percent of US corporations paid no federal income taxes from 1996 through 2000, a period of rapid economic growth and rising corporate profits.

An estimated 94 percent of US corporations reported tax liabilities amounting to less than 5 percent of their total income in 2000. The corporate income tax rate is ostensibly 35 percent, but companies are able to reduce their effective burden by claiming various deductions and credits.

US companies paid an average of $11.88 in corporate taxes for every $1,000 in gross receipts, the study said.

Small corporations were more likely to avoid taxation than large ones, it showed. About 38 percent of big companies (those with more than $250 million in assets or $50 million in revenues) paid no taxes during the five-year period.

Foreign-owned companies fared better in some respects than their US-based competitors. The report found that 71 percent of foreign-controlled corporations paid no taxes on their US income, while 89 percent had liabilities of less than 5 percent of their income.

The GAO didn't attempt to determine why so many companies were able to avoid paying taxes. It said possible explanations included legitimate deductions for current-year operating losses, losses carried forward from previous years, and sufficient credits to offset any tax liabilities. In addition, it said improper pricing of transactions between US and foreign operations could contribute to tax avoidance.

The percentage of federal tax collections paid by corporations has tumbled from a high of 39.8 percent in 1943 to a low of 7.4 in 2003. It ranged from 10 percent to 11 percent in 1996-2000, the period studied by the GAO. But since World War II, the share paid by individual income tax filers has remained relatively stable, bouncing between 40 percent and 50 percent. Most of the difference is explained by higher payroll taxes for Social Security and Medicare.

[Erich]

Here is another who isn't happy with this situation... It looks like the govt is trying to do something... at least with the Oil companies

Intelligence Report
Contributor: Gary Weiss
Published: April 13, 2008
Intelligence Report | PARADE Magazine

YOUR MONEY
Are You Paying For Corporate Fat Cats?

As you file your tax return this week, you may think you’re paying off the tax obligations for just your household. But you’re also footing the bill for American companies that are dodging billions of dollars in taxes. “Most major corporations have a tax department not just to comply with the tax code but also as a profit center,” says Charles Cray of the Center for Corporate Policy, a nonprofit watchdog group.

A 2004 U.S. Government Accountability Office (GAO) study found that 61% of American corporations, including 39% of large companies, paid no corporate income taxes between 1996 and 2000. Last year, corporations shouldered just 14.4% of the total U.S. tax burden, compared with about 50% in 1940.

While companies are getting off easy, thanks to loopholes, ordinary wage earners are getting stuck with the tab. The tax burden on individuals is expected to climb from $1.16 trillion in 2007 to $1.21 trillion this year, according to the Congressional Budget Office (CBO), while corporate tax receipts are expected to decline from $370 billion to $364 billion. By 2013, the CBO estimates, ordinary taxpayers’ bills may climb to $1.86 trillion while corporate tax bills drop to $327 billion.

One strategy of corporations is to create “shell companies” in places like Bermuda, Gibraltar and the Caribbean to avoid federal taxes. Corporations “set up an offshore division that has nothing more than a post office box,” says Rep. Richard E. Neal (D., Mass.), the chairman of a House subcommittee probing tax breaks. Experts estimate that the U.S. Treasury may be losing up to $100 billion a year due to shell corporations.

In one recent case, KBR—a former Halliburton subsidiary and the largest Iraq war contractor—admitted to “reducing tax obligations” through two Cayman Islands divisions, reportedly avoiding hundreds of millions of dollars in Medicare and Social Security taxes. A 2004 study by the GAO found that 24 of the largest federal contractors used Cayman Is*lands units to shave their tax bills.

Oil and other multinational companies also benefit from tax breaks, some specially written for them. Most are perfectly legitimate, but companies sometimes push the envelope too far. Pharmaceutical giant Merck paid $2.3 billion to the government last year for profits related to a Bermuda partnership.

In their defense, businesses say that U.S. corporate tax rates are the second highest in the developed world, making our country less competitive. But a study from the nonprofit group Citizens for Tax Justice found that, because of loopholes, the corporate tax burden in the U.S. is actually the world’s third lowest when measured as a percentage of gross domestic product.

Efforts to change the system are under way. In February, the House of Representatives passed a bill to end $18 billion in tax breaks for oil companies, and Rep. Charles Rangel (D., N.Y.), head of the House Ways and Means Committee, has introduced legislation to trim corporate tax rates while reducing loopholes.
__________________
The word 'politics' is derived from the word 'poly', meaning 'many', and the word 'ticks', meaning 'blood sucking parasites'.

[Nancy]

This doesn't suprise me at all, Erich. It seems to have been going on since the 1980's and escalated in the last decade.

I don't care if you are Republican, Democrat, Independent, whatever, everyone shares the blame for this atrocity.

The attitude of too many people is " there is nothing I can do, so what", which makes it possible for these types of conditions to exist. We can all do something.

Nancy

[Roy]

May 20, 2008 12:03:39 GMT -5 Nancy said:

This doesn't suprise me at all, Erich. It seems to have been going on since the 1980's and escalated in the last decade.

I don't care if you are Republican, Democrat, Independent, whatever, everyone shares the blame for this atrocity.

The attitude of too many people is " there is nothing I can do, so what", which makes it possible for these types of conditions to exist. We can all do something.

Nancy

[Roy]

Nancy,

We are all business people, here. Do we pay our fair shares of income Taxes? We get many business tax benefits too. Business that invest in equipment and property get even more taxes benefit.

When I had a brick and mortar retail business for about 15 years, during those 15 years I paid more in State Income Taxes then Federal Income Taxes. I took the risk of investment of my money, and I went bankrupt. However, during those years I generated a lot of other taxes revenue for the varies government to spend (sales taxes, unemployment taxes, social security taxes and many other). At one point I has provide 20 employees with a job. So the question is did I desire those tax break?

Roy

P.S.
In reality, the consumer paid all business expense when they paid for the products or service the business provide.

Who should be paid more the investor that invested millions of dollars or the working CEO that worked so this investor could be paid?

[Nancy]

Yes Roy, I am a business woman, and have been in business for myself one way or another for years. However, I have always paid my fair share of taxes.

I am all for tax incentives but when a mega million dollar corporation pays nothing, and a small business or individuals does not have the same advantages, than the system is broke and needs to be fixed.

It is not right that large corporations pay no taxes, cut employees wages, then give their CEO large bonuses for a good job.

You can defend the system all you want, but as a business woman who does understand how the system works, it needs to be fixed for everyone business in this country to benefit.

Nancy

[Roy]

Nancy

May 21, 2008 7:37:11 GMT -5 Nancy said:

It is not right that large corporations pay no taxes, cut employees wages, then give their CEO large bonuses for a good job.

Nancy

As an employees we do not like the above fact, but if we was the investor in the corporation then we want the CEO to maximal profits, even if it that included layoff and employees wage cut. Investor invests for maximum profit not to employ people. It the nature of the game!

I personally think the government should get ride of Corporation Income Taxes totally, Corporation do not paid taxes, they are just collecting taxes for the government, any taxes they paid is pass to the consumes as a price increase. The consumer paid the taxes in the end.

Roy

P.S.
I also believe in the value added taxes, and no income tax for anyone. There were no income taxes until the Civil War:

According to the History of the Income Tax in our almanac, the federal income tax was first enacted in 1862 to support the Union's Civil War effort. It was eliminated in 1872, revived in 1894, then declared unconstitutional by the Supreme Court the following year. In 1913, the 16th Amendment to the Constitution made the income tax a permanent fixture in the U.S. tax system.

From www.infoplease.com/askeds/federal-income-tax.html

The Government ran on Excise Taxes (type of value added sales tax) before income taxes.

[Sandi Moses]

May 21, 2008 22:57:51 GMT -5 Roy said:

As an employees we do not like the above fact, but if we was the investor in the corporation then we want the CEO to maximal profits, even if it that included layoff and employees wage cut. Investor invests for maximum profit not to employ people. It the nature of the game!

Roy.

If large corporations and other businesses had treated their employees as business partners and valued assets instead necessary evils and liabilities to be exploited, there never would have been the need for labor unions. There is more to running a successful business than greed that profits only the investors and the CEO.

Sandi

[Nancy]

Unfortunately you are right Sandi.

I or a member of my family have been involved with unions all of our lives. My father helped organize the Typographical Union for newspapers back in the 30's. My husband and I have been in the UAW for 30 years.

Although the benefits they negotiate for us as union members do help all Americans to live better, I wish there was not a need for them, as I can see where they can hurt Americans also.

But we can't blame them solely for the problems of outsourcing, and loss of jobs in this country. The problem as I see it, and maybe I didn't quite state it in my previous posts is pure and simple greed.

Non-Union people seem to think that because we are in a Union we have it made. Let me tell you that we don't. We take pay cuts, American Axle for example just took a $10.00 a hour pay cut, some of those skilled workers will be earning less that $15.00 a hour. I know for a lot of Americans they would love $15.00 an hour, my own sons included, but when you see the profits of the large corporations are making, and then they come and ask the workers to give up pay, while they pay their executives multi million dollar bonuses. It make me sick.

I am not say, Roy, that executives don't deserve a "fair" share of profits for their efforts. They do...but it needs to be across the board "fair."

I know a lot of people on this forum, and elsewhere don't see it my way, and that is all right. I try and look at the big picture, as to how it affects all of us, and I just can't see where corporations can get away without paying taxes, layoff workers, give bonuses to executives, send our jobs overseas, for the products to be shipped back to this country at an exorbitant costs, products that are defective, and can be made better and cheaper in this country, all so the "investors" can make a profit. That is taking profit and greed to a new level in my opinion.

So I guess all we can agree on is to disagree.

Nancy

[Sandi Moses]

For what it's worth, corporations view taxes as a business expense. Business expenses get passed on to customers. So if a corporation is required to pay an additional million dollars in taxes, they do not reduce the CEO's bonus by a million dollars. They do not lower their dividends to their shareholders by a million dollars. They raise their prices. So they don't really pay that million dollars.

We do.


Sandi

[chrisse]

Hi Sandi, Hi Nancy - We have the same "fat cat" CEOs here in Oz. The corporations bring them in as trouble-shooters (so they say) BUT the truth of the matter is they are put there to make huge profits which ups the share market prices on the Stock Exchange and in turn justifies their massive multi- million dollar contracts a lot of them have large quantities of shares personally so they make a killing at that level as well.

We, as consumers, at the bottom of the chain are paying higher prices for these goods and services that the large corporations provide e.g. electricity, telephone, banking fees etc. etc. The small shareholder is making some money from the rises on the Stock Exchange and good luck to them but again it's the LARGER shareholders (already wealthy people) who benefit the most.

THE RICH GET RICHER AND THE POOR GET POORER!!!

Chrisse & Maree