(MoneyWatch) Big U.S. companies pay much less in federal income tax than they typically like to advertise, according to a new government report.
In 2010, large, profitable corporations paid an effective tax rate of 12.6 percent of their global income, the General Accountability Office found. That compares with a top statutory rate -- or the rate paid before deductions and other tax breaks -- of 35 percent. Counting state, local and foreign taxes, U.S. multinationals paid an effective rate of roughly 17 percent.
"The average effective tax rates for profitable corporations were well below the federal statutory rate even when foreign and state and local income taxes were included," GAO stated in the report.
The findings add fuel to the debate over corporate tax reform, as many big companies lobby Congress to reduce rates and offer a tax "holiday" on overseas profits.
"Today's GAO report provides more stark evidence, if any is needed, that large, profitable U.S. corporations as a whole are not paying their fair share in taxes," said Sen. Carl Levin, D-Mich., in a statement. "When some U.S. corporations use unjustifiable loopholes and offshore gimmicks to avoid paying Uncle Sam, their tax burden is shifted onto hardworking American families and small business. Today's GAO report quantifies just how much of the corporate tax burden has been shifted onto other taxpayers: America's large, profitable corporations are now paying a lower tax rate than our teachers and firefighters."
Levin and Sen. Tom Coburn, R-Okla., last year asked the GAO to examine the issue of corporate taxes last year. In a year-long study, the accounting office looked at corporate tax returns for 2008 through 2010 and compared companies' income with what they had reported in their public financial statements.
Levin and other lawmakers in May singled out Apple (APPL) as one company that they say dodges taxes. The tech giant uses a network of subsidiaries that, because of different tax rates around the world, allow it to avoid taxes both at home and abroad, the the U.S. Senate Permanent Subcommittee on Investigations concluded in a report.
But Apple is symptomatic of a bigger problem of corporate tax avoidance, critics say. They accuse other major companies, such as General Electric (GE), Hewlett-Packard (HP), Microsoft (MSFT), of using a range of reporting, accounting and other legal maneuvers to minimize their exposure to taxes. Such companies also routinely win large tax subsidies from state and local governments in exchange for opening or keeping offices in a given locale.