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Big Corporations Pay One Third of Statutory Tax Rate

At the request of Senators Carl Levin (D-Michigan) and Tom Coburn (R-Oklahoma), the Government Accounting Office (GAO) recently conducted a study of the actual tax rates paid by companies that had $10 million or more in assets, a recent article from The Hill has reported.

The subsequent report revealed that in 2010 these large, profitable corporations paid an effective federal tax rate of 12.6% in spite of the fact that the statutory rate was 35%. Even when adding in local, state and foreign taxes, the rate paid climbs to only 17%.

How can that be, you ask. The answers lie buried in the Internal Revenue Code, which happens to be about 10 times the size of the Bible. Therein, savvy tax professionals find plenty of exemptions, deferrals, tax credits and other incentives which enable large corporations to dramatically reduce the actual taxes they must pay to Uncle Sam. Of course, the tax burden thus avoided gets shifted onto hardworking families and small businesses, many of whom at that point are paying a higher effective rate than the big boys.

According to Coburn, “giveaways and loopholes” bolster the case for comprehensive tax reform. I, for one, am skeptical whether any meaningful reform will ever see the light of day, but one never knows.







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