Friday, November 21, 2008

Corporations Pay A Lower Tax Rate Than The Official Rate

Last week I talked about how Americans in general might not be paying all the taxes they are supposed to. The same might be true about corporations. You can read about it at Tax Data Highlight Corporate Loopholes. Here is an exerpt:

"The Internal Revenue Service found that U.S. companies paid federal income taxes on their reported U.S. profits at far less than the 35% statutory rate, offering a potential revenue source for an incoming presidential administration that faces a yawning budget deficit.

Newly released data from the IRS show companies paid federal and foreign income taxes on their U.S. book income -- the amount reported to shareholders -- at a rate of 25.3% during 2005, the most recent year for which data were made available by the IRS."

Another is:

"Differences between accounting rules and tax laws mean companies keep two sets of books. Tax rules often allow them to take deductions on their tax returns that don't eat into their book profits reported to shareholders.

The IRS requires companies to file a form reconciling the gap between their book and taxable profits, called the Schedule M-3. U.S. companies included in the data 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%."

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