Corporate taxes melting away
Many profitable firms in past 3 years were able to skip paying
By Tom Abate, SF Chronicle.
Some of the United States' biggest, most profitable corporations saw their federal income tax rates decline over the last three years, thanks to recent tax cuts, according to a liberal think tank in Washington.
The 68-page report issued Wednesday by Citizens for Tax Justice arrived at its conclusions by gleaning the annual reports of 275 companies on the Fortune 500 list that shared one characteristic: All reported profits in 2001, 2002 and 2003.
Among the study's findings:
-- Eighty-two of the companies, which collectively reported $102 billion in pretax U.S. profits, paid no income tax in at least one of the years; together these 82 firms collected $12.6 billion in tax rebates over the three- year period.
-- Although the nominal corporate tax rate is 35 percent, a variety of tax breaks helped the entire group of 275 firms to reduce their effective tax rate to 17.2 percent in 2003 from 21.4 percent in 2001.
-- The report cited wide disparities among the group. It said SBC Communications paid 5.2 percent of its profit in corporate income taxes over the three years and General Electric paid 9.2 percent. For Amgen, the comparable figure was 26.1 percent, while Charles Schwab & Co. had an effective corporate income tax rate of 33.9 percent.
Separately, Internal Revenue Service figures show that total corporate income tax receipts fell to $128.8 billion in 2003, down 13.4 percent from 2001, when the comparable figure was $148.7 billion.
Robert McIntyre, the tax group's director and the report's principal author, said Bush administration tax cuts, notably including accelerated depreciation, have unfairly cut corporate income taxes, widened the budget deficit and shifted the tax burden to individuals.
"The whole tax system is in danger when people discover that companies that make millions of dollars more than them are paying less and less in taxes, '' he said.
William Ahern, a spokesman for the conservative Tax Foundation, said many of the tax policies cited in the report were bipartisan measures designed to stimulate economic growth.
"The 2002 tax bill was designed to be a three-year temporary stimulus to business investment,'' he said. "To turn around and complain that companies are paying less taxes because of those deliberately passed provisions is to ignore the rationale for their existence.''
The Citizens for Tax Justice report noted that business capital investment by the 275 companies studied fell 15 percent from 2001 to 2003.
Treasury Department spokeswoman Tara Bradshaw called the study misleading, arguing that accelerated depreciation gave companies a break during the recession but would increase their taxes in the future.
"What would have happened had the president not proposed these incentives?'' she said. "The economy likely would have been in far worse shape. ''
SBC spokeswoman Anne Vincent said "to say we're not paying our fair share in the last three years is ridiculous.'' She said that in 2003, by her firm's reckoning, SBC paid about 15 percent of its pretax income in state and federal income taxes. That SBC's effective tax rate is lower than the 35 percent nominal tax rate is largely because of deductions for contributions to retiree health and pension programs, she said.
Stanford law professor Joseph Bankman, an expert on business taxes, said corporate income taxes have been on a long, slow decline, for reasons including the fact that big firms have taken aggressive advantage of tax laws and because of legislation that reduced corporate taxes in order to reward investment and job creation.
Bankman said the debate over corporate income taxes should take into consideration how tax policies affect the federal deficit.
"Given our current huge deficit, we're replacing taxes with debt,'' Bankman said, adding that when the debt comes due, today's tax cuts are "a tax on our children.''
Many profitable firms in past 3 years were able to skip paying
By Tom Abate, SF Chronicle.
Some of the United States' biggest, most profitable corporations saw their federal income tax rates decline over the last three years, thanks to recent tax cuts, according to a liberal think tank in Washington.
The 68-page report issued Wednesday by Citizens for Tax Justice arrived at its conclusions by gleaning the annual reports of 275 companies on the Fortune 500 list that shared one characteristic: All reported profits in 2001, 2002 and 2003.
Among the study's findings:
-- Eighty-two of the companies, which collectively reported $102 billion in pretax U.S. profits, paid no income tax in at least one of the years; together these 82 firms collected $12.6 billion in tax rebates over the three- year period.
-- Although the nominal corporate tax rate is 35 percent, a variety of tax breaks helped the entire group of 275 firms to reduce their effective tax rate to 17.2 percent in 2003 from 21.4 percent in 2001.
-- The report cited wide disparities among the group. It said SBC Communications paid 5.2 percent of its profit in corporate income taxes over the three years and General Electric paid 9.2 percent. For Amgen, the comparable figure was 26.1 percent, while Charles Schwab & Co. had an effective corporate income tax rate of 33.9 percent.
Separately, Internal Revenue Service figures show that total corporate income tax receipts fell to $128.8 billion in 2003, down 13.4 percent from 2001, when the comparable figure was $148.7 billion.
Robert McIntyre, the tax group's director and the report's principal author, said Bush administration tax cuts, notably including accelerated depreciation, have unfairly cut corporate income taxes, widened the budget deficit and shifted the tax burden to individuals.
"The whole tax system is in danger when people discover that companies that make millions of dollars more than them are paying less and less in taxes, '' he said.
William Ahern, a spokesman for the conservative Tax Foundation, said many of the tax policies cited in the report were bipartisan measures designed to stimulate economic growth.
"The 2002 tax bill was designed to be a three-year temporary stimulus to business investment,'' he said. "To turn around and complain that companies are paying less taxes because of those deliberately passed provisions is to ignore the rationale for their existence.''
The Citizens for Tax Justice report noted that business capital investment by the 275 companies studied fell 15 percent from 2001 to 2003.
Treasury Department spokeswoman Tara Bradshaw called the study misleading, arguing that accelerated depreciation gave companies a break during the recession but would increase their taxes in the future.
"What would have happened had the president not proposed these incentives?'' she said. "The economy likely would have been in far worse shape. ''
SBC spokeswoman Anne Vincent said "to say we're not paying our fair share in the last three years is ridiculous.'' She said that in 2003, by her firm's reckoning, SBC paid about 15 percent of its pretax income in state and federal income taxes. That SBC's effective tax rate is lower than the 35 percent nominal tax rate is largely because of deductions for contributions to retiree health and pension programs, she said.
Stanford law professor Joseph Bankman, an expert on business taxes, said corporate income taxes have been on a long, slow decline, for reasons including the fact that big firms have taken aggressive advantage of tax laws and because of legislation that reduced corporate taxes in order to reward investment and job creation.
Bankman said the debate over corporate income taxes should take into consideration how tax policies affect the federal deficit.
"Given our current huge deficit, we're replacing taxes with debt,'' Bankman said, adding that when the debt comes due, today's tax cuts are "a tax on our children.''