Floyd Norris has published a new article on corporate taxes in the U.S. While corporations continue to complain that their tax burden is too high, statistics show that their tax burden is less than before and less than most developed countries.
The I.R.S. 2010 Data Book offers some information. In Table 6 on page 15, it details gross tax receipts for every fiscal year since 1960.
In the 1960s, corporate taxes amounted to about 22 percent of overall tax receipts, and averaged 3.9 percent of gross domestic product. In the most recent decade, the figures are about 12 percent of total taxes and 2.2 percent of G.D.P.
In other words, the corporate tax burden in roughly half what it was.
In times when US debt is a big concern, the next question must be about who faces the extra burden of US debt?
Or here is another set of available data. The Commerce Department calculates total corporate profits as part of its G.D.P report. Looking at 10-year averages to smooth out cyclical swings, pretax corporate profits are now higher than at any time in more than three decades. But corporate tax payments as a percentage of pretax income are lower than at any time since World War II.
So US debt must come at the expense of the taxpayer, and with higher income taxpayers benefiting from lower rates, the middle class faces a bigger burden. Is this any way to encourage growth in the US? Still the corporations argue that their tax rates are higher than in most of the world.
The news here is — or would be if it were true — that American companies face high effective rates. It is true that the 35 percent statutory rate is high by international standards, but there are so many exemptions and loopholes and incentives that relatively little money is actually collected.
If you read the fine print of the study carefully, you see this:
Total income taxes is defined to be the sum of all taxes imposed on income by local, provincial or state, national, and foreign governments during the year. It is the total tax provision and includes current taxes as well as the change in net deferred tax liabilities for the year.
So this counts taxes American companies do not actually pay, but only defer. There are numerous reasons for companies to have deferred taxes, often because tax laws enable expenses to be taken earlier than accounting rules provide. And companies with overseas profits can defer taxes indefinitely by never repatriating the profits.
Suffice it to say that US corporations are avoiding taxes as best they can. We would expect that of any corporation, but that the US government allows it–that is the question.