26 top American corporations paid no federal income tax from ’08 to ’12
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[url]http://rt.com/usa/low-corporate-tax-rates-275/[/url]
[QUOTE]Twenty-six of the most powerful American corporations – such as Boeing, General Electric, and Verizon – paid no federal income tax from 2008 to 2012, according to a new report detailing how Fortune 500 companies exploit tax breaks and loopholes.
The report, conducted by public advocacy group Citizens for Tax Justice (CTJ), focuses on the 288 companies in the Fortune 500 that registered consistent profit every year from 2008 to 2012. Those 288 profitable corporations paid an “effective federal income tax rate of just 19.4 percent over the five-year period — far less than the statutory 35 percent tax rate,” CTJ states.
One-third, or 93, of the analyzed companies paid an effective tax rate below 10 percent in that timespan, CTJ found.
Defenders of low corporate taxes call the US federal statutory rate of 35 percent one of the highest companies face in any nation. But the report signals how the most formidable corporate entities in the US take advantage of tax breaks, loopholes, and accounting schemes to keep their effective rates down.
“Tax subsidies for the 288 companies over the five years totaled a staggering $364 billion, including $56 billion in 2008, $70 billion in 2009, $80 billion in 2010, $87 billion in 2011, and $70 billion in 2012,” CTJ states. “These amounts are the difference between what the companies would have paid if their tax bills equaled 35 percent of their profits and what they actually paid.”
Just 25 of the 288 companies kept tax breaks of $174 billion out of the $364 billion total. Wells Fargo received the largest amount of tax subsidies - $21.6 billion - in the five-year period. The banking giant was joined in the top ten on that list by the likes of AT&T, ExxonMobil, J.P Morgan Chase, and Wal-Mart.
About 1 in 11 of the 288 companies paid a zero percent effective federal income tax rate in the five years considered. Pepco Holdings – which supplies utility services to Delaware, the District of Columbia, Maryland, and parts of New Jersey – paid a cumulative five-year effective rate of -33 percent, the lowest of any company in that period.
In fact, utilities came out particularly well among other industries.
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Allow me to feign surprise.
The US tax code is terrible. There are just so many loopholes all over the place.
When calculating the cost of sales of a product, there are three methods of valuating inventory (because the prices of goods you order will vary over time): First in, first out, weighted average cost, and last in, first out. First in, first out states that when you order a good, you intend to make use of that good before you make use of later goods of the same kind that you buy. Weighted average cost states that you combine the total cost of all your inventory of a certain good and divide by the quantity of that good in your inventory to provide a valuation on each good of that kind in inventory. Last in, first out states that when you order a good, you make use of that good first, even if you already have other of the same good in your inventory.
The significance of all this is that prices generally rise over time (such as from inflation), and that most modern taxation offices around the world only allow for FIFO or WAC for inventory valuation, LIFO is banned. But the IRS allows for LIFO. Say you order 5 of a product for $10 each one month, then the next month you buy another 5 of the same product but for $12 each. After this happens, you make use of 6 of those products, which is to be calculated in your cost of sales. Under FIFO, the cost of those products is (10+10+10+10+10+12) = $62. Under WAC, it is ((10x5 + 12x5)/10 x 6) = $66. Under LIFO, it is (12+12+12+12+12+10) = $70.
When a company valuates its inventory under LIFO for tax purposes, it is providing figures that say its cost of sales is higher, therefore its gross profit reported is lower (as shown above, the difference between FIFO and LIFO is that under LIFO you appear $8 worse off). When your gross profit is lower, your tax liability is lower as well. The company is not actually worse off under LIFO, because modern accounting is accrual-based and not cash-based. This is just one of the many examples of how the US tax code is simply inadequate.
Well yeah if they had to pay tax they'd have less money to employ people /s
[QUOTE=Simples;44089420]Well yeah if they had to pay tax they'd have less money to employ people /s[/QUOTE]
I don't know how taxes are levied on companies in the US, but if they are like Australia, then company tax would be levied on net profits. Wages are considered an operating expense, which is part of calculating net profit (net profit = gross profit - operating expenses). Therefore it doesn't matter what the tax rate is, you pay for your employees before you pay your tax. And net profits are not responsible for creating jobs - business expansions that create jobs are often funded via finance (loans) or equity (shares).
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