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Corporations are evading taxes

The majority of US corporations are evading (or at least avoiding) paying their fair share of income taxes:

Two out of every three United States corporations paid no federal income taxes from 1998 through 2005, according to a report released Tuesday by the Government Accountability Office, the investigative arm of Congress.

While $2.5 trillion in corporate sales are going untaxed, individual taxpayers are left holding the bag. Out of the $2.4 trillion in federal revenue taken in 2006, less than 15 percent was paid by corporations, while 43 percent was paid by individuals (see Table 1 here).

Senator Carl Levin (D-MI) put it this way:

This report makes clear that too many corporations are using tax trickery to send their profits overseas and avoid paying their fair share in the United States.

Whether corporate tax evasion/avoidance is due to off-shoring of profits or plain old fraud, the end result is the same: individuals are left to subsidize the corporate welfare that the robber barons themselves are not willing to finance.

Sounds like the 1890's all over again.

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Published Wednesday, August 13, 2008 10:04 PM by RussMcBee

Comments

Thursday, August 14, 2008 5:38 AM by jonathanhickman

# re: Corporations are evading taxes

I saw this headline yesterday and wondered about it. They don't really go into detail about why so many corps aren't being taxed.

As an accountant, I tend to do a fair amount of small corporations (because I enjoy them). I *very* rarely see small corps pay tax, and the majority of corporations are small. None of those corporations are cheating; they simply take their profits home in the form of wages.

Obviously there are a lot of bigger companies that do questionable acts to avoid tax, but I wonder at the percentage. I tend to think the 2/3 figure is inflated.

Thursday, August 14, 2008 4:50 PM by RussMcBee

# re: Corporations are evading taxes

Jonathan, it doesn't sound to me like they're talking about Subchapter S corporations here (which is what I think you're referring to by saying they take their profits as wages). You may be right that the 2/3 figure is inflated, but it sounds to me like this is more about offshoring profit and plain old evasion.

Wednesday, August 20, 2008 11:05 PM by DavidFriedman

# re: Corporations are evading taxes

Take a look at the Reuters story on the same report:

http://www.reuters.com/article/bondsNews/idUSN1249465620080812

According to them, the figure isn't corporations that paid no tax during the seven years, it's corporations that paid no tax in at least one of the seven years. There is nothing particularly shocking about a corporation that, one year in seven, fails to make a profit.

Assuming Reuters is right, what is shocking is the incompetence of the New York Times in confusing one year in seven with seven years in seven.

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