Most Companies Pay No Federal Income Tax

GAO Study Also Finds 68% Of Foreign Companies In U.S. Avoid Corporate Taxes

(AP)  Two-thirds of U.S. corporations paid no federal income taxes between 1998 and 2005, according to a new report from Congress.

The study by the Government Accountability Office, expected to be released Tuesday, said about 68 percent of foreign companies doing business in the U.S. avoided corporate taxes over the same period.

Collectively, the companies reported trillions of dollars in sales, according to GAO's estimate.

"It's shameful that so many corporations make big profits and pay nothing to support our country," said Sen. Byron Dorgan, D-N.D., who asked for the GAO study with Sen. Carl Levin, D-Mich.

An outside tax expert, Chris Edwards of the libertarian Cato Institute in Washington, said increasing numbers of limited liability corporations and so-called "S" corporations pay taxes under individual tax codes.

"Half of all business income in the United States now ends up going through the individual tax code," Edwards said.

The GAO study did not investigate why corporations weren't paying federal income taxes or corporate taxes and it did not identify any corporations by name. It said companies may escape paying such taxes due to operating losses or because of tax credits.

More than 38,000 foreign corporations had no tax liability in 2005 and 1.2 million U.S. companies paid no income tax, the GAO said. Combined, the companies had $2.5 trillion in sales. About 25 percent of the U.S. corporations not paying corporate taxes were considered large corporations, meaning they had at least $250 million in assets or $50 million in receipts.

The GAO said it analyzed data from the Internal Revenue Service, examining samples of corporate returns for the years 1998 through 2005. For 2005, for example, it reviewed 110,003 tax returns from among more than 1.2 million corporations doing business in the U.S.

Dorgan and Levin have complained about companies abusing transfer prices - amounts charged on transactions between companies in a group, such as a parent and subsidiary. In some cases, multinational companies can manipulate transfer prices to shift income from higher to lower tax jurisdictions, cutting their tax liabilities. The GAO did not suggest which companies might be doing this.

"It's time for the big corporations to pay their fair share," Dorgan said.

[frankie_C]

If there are 1.2 million U.S. companies and 25% of them had revenue of $50 milion or more, then that would be 300,000 companies with $50 million or greater revenue each, equalling $15 trillion, which exceeds our GNP by $1 trillion.

Further, the article states directly that all 1.2 million of these companies have only $2.5 trillion in sales. This means that no greater than one-sixth the percentage claimed could possibly have more than $50 million in revenue, or 4%.

Furthermore, as the likely average revenue among a sample of companies with revenue of $50 million minimum is likely to be around $150 million, to be conservative, since some very large companies with over $1 billion of revenue are part of that sample, therefore, little more than 1% of the 1.2 million companie paying no taxes are likely to have revenue exceeding $50 million.

So the journalist is mistaken by a factor of more than 20.

Is it surprising that around 12,000 companies of material size pay no income tax?

No, not really. It is entirely conceivable that that number of companies are losing money, or that they are just special purpose vehicles, passing their income onto a parent.

However, the journalist really does do a good job at exaggerating the problem by a factor of 20.

It would be nice if journalists might learn a little arithmetic before writing articles on the economy.

[krisd999-2009]

Corporate taxes are double taxation and should be repealed immediately. The money is going to foreign jurisdictions instead of coming to America to generate jobs. They will be repealed sooner or later or America won''t have any industry left.

[rudoggins]

Geez people....the problem here is this articles assertion as fact. As each and every reader here knows, everybody pays taxes. If the Corp is an S Corp the individual owners pay the taxes on their individual returns(the taxes were paid, just not counted by the GAO), if a C corp, the company has to MAKE MONEY in order to owe taxes. Just take a look at the returns online (yahoo or google) the past year. Most Corps (about 60%) haven''t been making money.....wait...was there some mention in the news about a recession recently?

[rudoggins]

Geez people....the problem here is this articles assertion as fact. As each and every reader here knows, everybody pays taxes. If the Corp is an S Corp the individual owners pay the taxes on their individual returns(the taxes were paid, just not counted by the GAO), if a C corp, the company has to MAKE MONEY in order to owe taxes. Just take a look at the returns online (yahoo or google) the past year. Most Corps (about 60%) haven''t been making money.....wait...was there some mention about a recession?

[rudoggins]

Geez people....the problem here is accepting this article as fact. As each and every reader here knows, everybody pays taxes. If the Corp is an S Corp the individual owners pay the taxes on their individual returns(the taxes were paid, just not counted by the GAO), if a C corp, the company has to MAKE MONEY in order to owe taxes. Just take a look at the returns online (yahoo or google) the past year. Most Corps (about 60%) haven''t been making money.....wait...was there some mention about a recession?

[libsluv2spit]

The flat tax is looking better , 20 % May not be fair ,but,its very one sided,now.. Nationalize the Oil Companies ,too.How much are we the Taxpayers subsidizing Big Oil ?

Posted by beehive21 at 10:20 PM : Aug 12, 2008
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i am not sure about oil companies..they dont qualify..i know farming does

[beehive21-2009]

The flat tax is looking better , 20 % May not be fair ,but,its very one sided,now.. Nationalize the Oil Companies ,too.How much are we the Taxpayers subsidizing Big Oil ?

[libsluv2spit]

When the Federal Reserve is risking a collapse of the real economy to save the Financials'''' using the taxpayer as the back stop, I would say that ''''capitalism for the poor and working class socialism for the rich'''', is in fact a synopsis of our current predicament that is not that far wide of the mark.

Posted by Marshall_Nee at 06:33 PM : Aug 12, 2008
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actually I have a more ''effective'' way to police this..but the question is..can you stomach it?

a lot talk a lot of bravery but when push comes to shove..they falter.

[libsluv2spit]

libsluv2spit

To tie up the loose ends for you: these corporations are presently paying minimal to no taxes AND have been doing this for years. What level of kindergarten did you reach?

Posted by bm6005 at 06:04 PM : Aug 12, 2008
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whne your done acting like a little baby who just lost his lolipop...that is THE TOPIC I WAS TALKING ABOUT..now what i was giving is the theory ON WHY IT WAS BEING DONE LIKE THAT..now it fails is because we are incapable to police THIS THEORY..hence we have runaway abuses..

now since your are all pumped up on this..you might want to check the company you are working for..humm you seem pretty upset..let me guess minimun wage? or just ''got the pink slip''?

[libsluv2spit]

So you''''re saying I have to wait for this or do something different for this to happen? What a MORON you are!!!

Posted by bm6005 at 06:02 PM : Aug 12, 2008
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its already happening ..o enlightened one

[endofbones]

The solution to this problem is bipartate in nature. First, we need to have legislation to review corporate charters and democratically revoke them if they are not "serving the public" not their shareholders only.

Secondly a way of restoring accountability for these corporations who sell goods or sevices within our county is to mandate that they be required to recycle and or dispose of all waste generated as a result of thier doing business. This means auto manufacturers be required to recycle your vehicle when it is broken, appliance manufacutrers, electronics, etc.. Much like the bottle deposit.

to anyone who says well they will just increase the price we pay or they will just not sell goods in our country is cazy, we have a 300 million person market, if we impose restrictions on foreign corporations without imposing protectionary measures you will see them bend over backwards to continue to utilize our market.

[endofbones]

Time and time again these huge corporations have exploited our country to make massive profits without giving anything back.

The real irony of this is that we the people own these corporations we give them their corporate charters and we enable them exploit us time and time again.

Lets look at the housing crisis as a great example, 4 banks went bankrupt our government bailed them all out with its classic corporate welfare, but what about those people who were exploited by these predatory lenders? nothing. Why is this?

Consider this, the primary company responsible for the housing crisis is UBS a huge swiss bank that sold their terrible speculator loans with floating interest rates to consumers and then transferred their liability to other firms. To date UBS has yet to be indicted. why?

UBS''s Phil Graham is Jon Mccains top advisor and UBS has given Obama millions of dollars in campaign contributions and millions more for the DNC.

The fact is our politicians in our 2 party duopoly are in the pockets of these same evil corporations so no legislation will get through congress.

The only canidates that are looking to reign in corporations are Ralph Nader and Cynthia McKinney, so if you vote for Obama or McCain you are essentially telling their respective pseudoparties "please continue to allow these corporations to exploit our country"

[jncc1701]

How about simple fairness, this Conservative hysteria of higher taxes is insane. While they keep the middle class distracted with religion they rape the working man who like the good sheep that he is votes for economic idea that do nothing but rape him some more.
This nonsense that higher taxes causes unemployment shows just how much of a failure the US education system is.
Most of us do not like it when illegal immigrants use tax pay funded services because they do not pay taxes to the system. This is no different.

[marshall_nee]

think of it this way..PEOPLE ALL OVER THE WORLD are still killing themselves to get over here and get rich..you would not know what you are babbling about till you have a true dose of socialism..want a try..go to valenzuela or cuba

Posted by libsluv2spit at 04:50 PM : Aug 12, 2008

When the Federal Reserve is risking a collapse of the real economy to save the Financials'' using the taxpayer as the back stop, I would say that ''capitalism for the poor and working class socialism for the rich'', is in fact a synopsis of our current predicament that is not that far wide of the mark.

[bm6005]

libsluv2spit

To tie up the loose ends for you: these corporations are presently paying minimal to no taxes AND have been doing this for years. What level of kindergarten did you reach?

[bm6005]

see them move to china or canada or india..when they do that..then unemployment rises..less money collecting salary..less money circulating..simple math..
Posted by libsluv2spit

So you''re saying I have to wait for this or do something different for this to happen? What a MORON you are!!!

[hypnotoad72]

libsluv2spit - the comment about socialism for the rich isn''t entirely inaccurate. I mean, companies that engage in predatory practices and then fail like we''ve seen are getting bailed out by the government (which means the taxpayers). How is that different than welfare paying for a single woman who chose to get pregnant 6, 8, or 18 times? "Corporate personhood".

[allurfears]

INCOMPETENT WRITER CONFUSES ISSUES in this article

"An outside tax expert, Chris Edwards of the libertarian Cato Institute in Washington, said increasing numbers of limited liability corporations and so-called "S" corporations pay taxes under individual tax codes."

THAT is NOT what the article is about. "S" Corps and LLC''s MUST BE OWNED BY US CITIZENS, and THEY PAY TAXES unlike a lot of "typical" C corporations. To "S" Corps and LLC''s together with FOREIGN companies NOT paying taxes is a LIE and makes you wonder if the writer of this article is STUPID or just INCOMPETENT.

[libsluv2spit]

Amerika: capitalism for the poor and working class, socialism for the rich.


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Posted by noloyalisti at 04:42 PM : Aug 12, 2008
+ report abuse


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let me guess..you are one of those many who ''decided'' they dont to learn math or science when in high school?

think of it this way..PEOPLE ALL OVER THE WORLD are still killing themselves to get over here and get rich..you would not know what you are babbling about till you have a true dose of socialism..want a try..go to valenzuela or cuba

[Syndicate]

Duh