Monday, July 22, 2013

Despite Conservative Claims of a Crushing U. S. Corporate Tax Rate, Actual Rates Are Pretty Low

Reality Bites Conservative Talking Points, Again

Listen to Conservatives and they argue that U. S. corporate tax rates, with a top rate of 35% at the federal level and more at the state level are just crushing American business.  High tax rates can stifle business investment and initiative, but first you have to have the high tax rates.  The GAO has done a study and concluded that despite the statutory tax rate of 35%, American companies don’t even pay half of that.

For tax year 2010, profitable Schedule M-3 filers actually paid U.S. federal income taxes amounting to 12.6 percent of the worldwide income that they reported in their financial statements (for those entities included in their tax returns). This tax rate is slightly lower than the 13.1 percent rate based on the current federal tax expenses that they reported in those financial statements; it is significantly lower than the 21 percent effective rate based on actual taxes and taxable income, which itself is well below the top statutory rate of 35 percent. The relatively low federal effective tax rate cannot be explained by income taxes paid to other countries. Even when foreign, state, and local corporate income taxes are included in the numerator, for tax year 2010, profitable Schedule M-3 filers actually paid income taxes amounting to 16.9 percent of their reported worldwide income.

So should everybody look for a retraction by Conservatives?  Yeah, right.

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