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