Thirty companies paid no income tax 2008-2010: report
By Kevin Drawbaugh | Reuters – 38 mins ago
(Reuters) - Thirty large and profitable U.S. corporations paid no income taxes in 2008 through 2010, said a study on Thursday that arrives as Congress faces rising demands for tax reform, but seems unable or unwilling to act.
Pepco Holdings, a Washington, D.C.-area power company, had the lowest effective tax rate, at negative 57.6 percent, among the 280 Fortune 500 companies studied.
The statutory U.S. corporate income tax rate is 35 percent, one of the highest in the world, but over the 2008-2010 period, very few of the companies studied paid it, said the report.
The average effective tax rate for the companies over the period was 18.5 percent, said Citizens for Tax Justice and the Institute on Taxation and Economic Policy, both think tanks.
Their report also listed General Electric Co, Paccar Inc, PG&E Corp, Computer Sciences Corp and NiSource Inc as among the 30 that paid no taxes. All 280 corporations examined were profitable over the period.
Corporations will say rightly that the loopholes that let them slash their taxes were perfectly legal, the report said.
"But that does not mean that low-tax corporations bear no responsibility ... The laws were not enacted in a vacuum; they were adopted in response to relentless corporate lobbying, threats and campaign support," the report said.
As Congress and the Obama administration struggle with a sluggish economy and high deficits, corporations are pressing Capitol Hill for more tax breaks, including one that would let them bring home overseas profits at a reduced tax rate.
The congressional "super committee" tasked with finding at least $1.2 trillion in additional budget savings by November 23 is so far deadlocked across a familiar divide -- Republicans refusing any tax hikes, Democrats defending social programs.
On Tuesday, a panel of budget experts warned super committee members that they would fail the country if they do not meet their goal. Financial markets have been waiting for many months for signs that Washington can get its financial house in order, but few have been forthcoming.
LOOKING BACK AT REAGAN
The report referred back to the 1986 tax reform pushed through by President Ronald Reagan, a Republican, who approved the largest corporate tax increase in U.S. history, largely by ending tax breaks, while cutting individual tax rates.
"Reagan solved the problem by sweeping away corporate tax loopholes," said the report, which was co-authored by Citizens for Tax Justice chief Robert McIntyre. His research 25 years ago played a key role in convincing Reagan reform was needed.
The industrial machinery business enjoyed the lowest effective tax rate during the study period, while the highest rate was paid by healthcare companies, the report said.
What are the tax breaks that corporations enjoy? One big one is accelerated depreciation that lets them write off equipment faster than it actually wears out. Deductions on executive stock options help. So do tax breaks for research and development and for making products in the United States instead of overseas. Offshore tax shelters play a role, too.
The average effective corporate tax rate, as calculated by McIntyre's group, was about 14 percent before the Reagan reforms; afterward it shot up to 26.5 percent in 1988.
As companies found their way around the reforms, the effective rate fell back to about 17 percent by 2002-2003.
Unlike in Reagan's time, taming corporate tax breaks alone will not solve today's deficit problem. Such breaks cost the government about $102 billion in lost revenues in 2011, a year when the federal deficit was an estimated $1.3 trillion.
Corporate loopholes are dwarfed by tax breaks that benefit individuals, such as the mortgage interest tax deduction -- a middle class sacred cow -- on its own worth $104 billion.
Still, said the report, "If we are going to get our nation's fiscal house in order, increasing corporate income taxes should play an important role."
(Reporting by Kevin Drawbaugh; editing by Carol Bishopric)
Reuters.com
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