Throughout the recent campaign, whenever tax policy was topic, the Republican representative would complain that corporate tax rates were too high. If we would simply remove that onerous burden, the economy would be healed and job creation would trickle down to those below. I would have to restrain myself from screaming at the TV that, while the tax code may call for a rate of 35% to be assessed on corporate America, the loopholes woven into law and regulation through the collusion of lobbyests and legislators reduced their burden dramatically.
This Government Accountability Office report states that between 1998 and 2005, about two-thirds of the corporations operating in the United States PAID NO TAXES.
Now, new IRS data shows typical American companies paid only 25.3 percent of their U.S. book income in federal corporate taxes in 2005.
U.S. companies “reported about $1.35 trillion in pretax U.S. book income to their investors in 2005, but about $1.03 trillion to the IRS — a difference of about 23%.”
A quick back of the envelope calculation shows that the difference between paying 35 percent on $1.03 trillion in income and $1.35 trillion in income is approximately $112 billion — enough to finance more than half of CAP’s ambitious “Green Recovery” plan to jumpstart a clean energy economy.
Some differences between book and reported income are legal and legitimate, but they can also be a sign of sheltering and abuse. Effective tax reform would first broaden the tax base by closing loopholes and eliminating shelters, before considering a lower statutory corporate rate.