U.S. Corporations Paid Far Less Than Legally-Imposed Tax Rate: Study
WASHINGTON (Kevin Drawbaugh) - Twelve big U.S. companies paid far less than the statutory corporate tax rate from 2008 to 2010, despite making substantial profits in that period, said a report released on Wednesday.
With the Obama administration drafting a corporate tax reform plan, the report found General Electric Co, American Electric Power Co Inc, DuPont Co and nine other companies had a negative 1.5 percent tax rate on $171 billion in profits over the three years studied.
"Not a single one of these companies paid anything close to the 35 percent statutory tax rate," said the report from Citizens for Tax Justice, a left-leaning group based in Washington that promised more details later this year.
The White House and Congress are considering an overhaul of the corporate tax system as a partial solution to the federal deficit, projected to hit $1.4 trillion this year.
Critics say tax loopholes promoted by corporate lobbyists and enacted by Congress are to blame for a system that lets companies avoid taxes, usually in perfectly legal ways.
Some business leaders have said they could live with closing some of these loopholes, but in return, they have said they want the statutory tax rate lowered. It is among the highest rates in the industrialized world.
Both President Barack Obama and Republicans want to trim the rate. Obama has said he wants to end enough corporate tax breaks to compensate for the revenue that would be lost from a lower rate. Republicans have blasted that as "tax hikes."
The Business Roundtable, a lobbying group for corporate CEOs, issued a report in April that said U.S.-based companies faced an average effective tax rate of 27.7 percent in the 2006-2009 period, more than their non-U.S. competitors.
The debate promises to go on for months and possibly years. U.S. Treasury Secretary Timothy Geithner last week predicted movement on tax reform later in 2011.
Citizens for Tax Justice produced a report in the 1980s that helped lead to President Ronald Reagan's landmark 1986 tax reforms. Since then, the tax code has become riddled with exemptions, deferrals and other special breaks.
Companies singled out in Citizens for Tax Justice's newest report also included Verizon Communications, Boeing Co, Wells Fargo & Co, FedEx Corp and Exxon Mobil Corp.
'TIP OF ICEBERG'
"These 12 companies are just the tip of the iceberg of widespread corporate tax avoidance," said Bob McIntyre, director of Citizens for Tax Justice, which is working on a broader report covering the Fortune 500 companies.
Elected officials should make "reducing or eliminating the vast array of corporate tax subsidies the centerpiece of any deficit-reduction strategy," he said.
GE spokesman Andrew Williams said the company is "fully compliant with all tax laws. There are no exceptions."
He said GE's 2010 tax rate was low because the company lost billions of dollars in GE Capital, its financial arm, as a result of the global financial crisis. "GE's tax rate will be much higher in 2011 as GE Capital recovers," he said.
Citizens for Tax Justice said that in the 2008-2010 period, 10 of the dozen companies studied enjoyed at least one year in which they were profitable, but paid no taxes.
Exxon Mobil had a 14.2 percent effective tax rate over the 3-year period, the highest of the 12 companies cited in the report, according to the group.
Exxon Mobil spokesman Alan Jeffers said, "Our effective tax rate in this country over the past six years has averaged about 32 percent. Last year our total taxes and duties to the U.S. government were $9.8 billion, which includes an income tax expense of $1.8 billion."
American Electric Power and DuPont did not respond to requests for comment. DuPont effectively paid $258 million in taxes in the first quarter of 2011, a 15.2 percent tax rate.
(Additional reporting by Matthew Daily and Ernest Scheyder in New York, Anna Driver in Houston, Scott Malone in Boston; Editing by Richard Chang)
Copyright 2011 Thomson Reuters. Click for Restrictions.
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First Posted: 06/01/11 04:54 PM ET Updated: 08/01/11 06:12 AM ET