Corporate Tax Rates Effectively Already Below Obama's Proposed Level

President Obama hopes to bring change to a loophole-ridden corporate tax code that allows potential tax dollars to slip through the cracks. In exchange, he's willing to lower the top rate to a level above what many corporations effectively pay today.

Obama announced a proposal Wednesday to overhaul the country's corporate tax structure. Under the terms of the new plan, the president will seek to eliminate many of the corporate tax breaks that American companies enjoy. Obama proposes lowering the top marginal corporate tax rate to 28 percent from the current 35 percent.

Members of the business community, for their part, have long maintained that America's corporate rate, nominally the highest in the world, should be lowered. But that 35 percent rate is more theory than practice. Studies indicate that after tax breaks, the effective corporate tax rate is in fact closer to 25 percent, and one analysis found that nearly 300 major companies paid an average rate of just 18.5 percent between 2008 and 2010.

The Obama administration hopes closing the loopholes will offset revenue lost from lowering the tax rate.

The question of how much companies should be expected to pay in taxes has taken on new urgency in the wake of last summer's debt ceiling crisis, which refocused attention on the federal budget deficit and moved lawmakers to begin looking for new ways to cut the government's costs or, in this case, reconfigure revenue streams.

Corporations employ a slew of strategies to minimize the amount they pay in taxes. Some companies park assets overseas where they can't be taxed, while others claim sizable deductions based on the stock option packages offered to their employees. Almost 70 percent of companies are structured in such a way that they don't pay any federal corporate income tax at all, instead passing along the burden to investors.

Thanks to these and other techniques, many companies clock in at a level far below the official 35 percent tax rate. In a three-year span from 2008 to 2010, the nonprofit group Citizens for Tax Justice found that there were 30 companies among the Fortune 500 -- including Verizon, General Electric, Wells Fargo and Boeing -- that paid nothing in federal income tax the entire time. More recently, analysts pointed out that Facebook's upcoming initial public offering is designed in such a way as to allow the company to sidestep taxes for 2011 and get half a billion dollars' worth of refunds for previous years.

In taking aim at corporate tax breaks, Obama could risk the displeasure of many large and politically influential companies. The firms that received the biggest tax breaks in 2009 -- among them ExxonMobil, Bank of America and General Electric -- were also among the biggest campaign contributors in the 2010 midterm elections.

Comments

[Italian-in-NY]

02:35 PM on 08/31/2012

It's called carryback provision, and you can recover taxes you paid in the previous 2 years if you incur in a loss this year.
So the article is inaccurate

[ronp121]

09:49 AM on 02/23/2012

Romney basically has the same plan for corporations. One little difference between Romney's plan and Obama's is that Romney instead of paying for the tax cuts and the closing of loopholes would instead make cuts in Medicare and Social Security to pay for it. Choice is yours america. Not that this will go anywhere this year but the choice will be ours to make on which one happens.

[K August]

05:57 AM on 02/23/2012

Closing loopholes and dropping the top rate is better than doing nothing and it's sure sounds better than the GOP mantra that the 1% need more and more tax cuts because they will create jobs...... this time.....maybe!

If all it took was more cuts for the 1%, where are the jobs ?.......they've had their cuts for over 10 years now.

I'm glad to see the President wants to make some serious changes.

[crazyindc1984]

04:34 AM on 02/23/2012

End all loopholes and deductions. Set flat tax rates for all income brackets above the poverty line starting at 0% and go up from there.

[SharedGrowth]

11:32 PM on 02/22/2012

28% is not low enough to attract high-value, high-wage operations to the U.S. The Shared Economic Growth proposal ( www.sharedeconomicgrowth.org ) would make America the best place on earth to locate such operations, it would not add a dime to the deficit, it would shut down corporate tax games and securely tax the income, and it would would shift the tax burden from middle-class wage earners to parasitic wealthy speculators and market manipulators. But therein lies the problem. Obama will not support it because his POLICIES are dedicated to serving wealthy speculators, manipulators, and bankers while his WORDS talk about supporting the middle class.

[sarabono]

11:21 PM on 02/22/2012

This is exactly why we need the Fair Tax.

The whole current tax system, all 77,000 pages of it, needs to be put in the shredder.

[jondekonkeroo]

12:15 AM on 02/23/2012

the fair taxi is only fair to billionaires. we're alreadyh too far for that to bleed america any more. it would be civil war. it may be anyway.

[wtf is this]

11:19 PM on 02/22/2012

Adding a couple percentage points to the tax makes those that are already paying high rates pay higher.
Getting rid of loopholes makes those that are avoiding taxes pay a fair share.
Seems like an obvious choice.

[bookreader451]

06:39 AM on 02/23/2012

Actually the winners would be small and medium businesses that don't get the loopholes the larger corporations and multinationals do. .

[dragonladywaltham]

09:58 PM on 02/22/2012

Yes, the reason is so our largest profiting companies like GE, Exxon, and BOA, pay more than the " 0" taxes they do today!!!!

[joyz41]

08:22 PM on 02/22/2012

My understanding of Obama's proposal is (1) eliminate loopholes so that oil companies and companies like GE will be made to pay taxes at a fair rate and (2) reduce tax on manufacturing companies. Reduced taxes allowed Apple to open a plant in Brazil, so this move to reduce taxes on manufacturing sector in the US will bring back many jobs. I trust Obama who is doing what is good for America instead of playing politics with Americans' lives--present and future.

[crazyindc1984]

04:36 AM on 02/23/2012

"I trust Obama who is doing what is good for America instead of playing politics with Americans' lives--present and future. "

LMAO!

[K August]

05:29 AM on 02/23/2012

You think 30 of the biggest companies paying no taxes is a laughing matter?

[LittleStream]

06:55 PM on 02/22/2012

There are two reasons this country is in the financial mess we find ourselves today. 1) overspending by the congress 2) not taxing the wealthy fairly. The wealthy no entitlement to pay less taxes because they make more money.

[VPerry24]

08:09 PM on 02/22/2012

Why people can't see the truth with this guy! He is no different than Bush!
Expert: Financial Bill Has Huge Loophole
McClatchy Washington Bureau

[forgetpartylines]

11:31 PM on 02/22/2012

Really hes no different than bush? If i remember correctly bush started two wars and cut taxes during his term while also raising standards on education partly through unfunded mandates. But you know obama's totally done that too.

[crazyindc1984]

04:40 AM on 02/23/2012

Look up the tax statistics on income from the IRS. They don't pay less.

If people think they should pay more than what they do, fine. But don't go around saying they pay less than you or me. My fed tax rate this past year was roughly 4% and I am above the median household income for the country. Have one dependant, a nonworking spouse, and claimed the standard deduction. So there were not a bunch of loopholes that I used to get it that low.

[K August]

05:34 AM on 02/23/2012

We're talking about corporations that make billions and pay no federal tax and sometimes even get refunds. Not YOU and what you owe in Federal tax.

Add up your other taxes....state, local, sales taxes etc.
I bet you paid more than 4%......as a percentage of your income.

[nakedemperors]

05:36 PM on 02/22/2012

The Naked Emperor on Corporate Greed & Corruption. Watch him debate Mitt Romney on these two top domestic issues:

http://www.thenakedemperor.com/oligarch/debating-mitt

More on Corruption and Greed in Politics & Wall St go to:

www.thenakedemperor.com

[imagine2011]

05:05 PM on 02/22/2012

i say vote for Ron Paul, he will do away with the wars, and eliminate all federal income taxes, the bogus FED, plus give the states back their control (as in the constitution), also give us back all our freedoms, what a great country it could be once again. Since everyone is so against wars, the FED monopoly money banking system, the fed. gov. overreaching and breaking of our constitutional laws, taking away and regulating our civil freedoms and all fed.income tax withholdings, then why dont people vote for someone who offers exactly what we are asking for? On top of it all, this man will tell you the truth! Ron Paul has been uncorruptable for 40 years in washington. He is like a modern day Founding Father. you guys have to check out his you tube speeches, he really makes alot of sense, which we havent had in most of our lifetimes.

[Robert SF]

05:56 PM on 02/22/2012

What makes you think they wouldn't block him just like they've blocked Obama?

[bigfootphd]

06:13 PM on 02/22/2012

Or that a combination of Democrats and Republicans wouldnt just block him like they did with Obama?

[Frank Marinopoulos]

06:29 PM on 02/22/2012

i wont vote for obama again he sign ndaa and patriot act into law so my will vote go for ron paul he is the only one out there speaking any truth everybody else including obama are jokes they dont even follow there own constitution the wars are illigal and i think its time to bring all our troops home from all bases around the world we are into everybody else business and it always backs fires on us so i agree on ron paul and his policies i dont agree with everything but hes the best choice we have had in the last 20 yrs i dont think we will see another man as ron paul thats fighting for the people not to gain power for himself hes here to work for the people

[Mark Cormier Arizona]

10:46 PM on 02/22/2012

Sorry to say, but a vote for Ron Paul is a wasted vote.

[SharedGrowth]

11:21 PM on 02/22/2012

That is error for multiple reasons. First, the fact is that of the 4 remaining Republican candidates, Ron Paul is the only one who appeals to independents and to a sizable number of Democrats, and he is running second in the delegate count. Second, that whole line of thinking is fallacious. You are more likely to be struck dead by lightening on your way to the polling booth than to have your one vote determine the outcome of a presidential election. Therefore,, there are only two sensible reasons to vote. First is to add your vote count to a message, in which case you should vote for who you like. The second is to assume that others will think like you, in which case you should again vote for who you like.

[WebbieGuru]

06:43 PM on 02/23/2012

Voting for Mittens would be a wasted vote.

[Oregonian76]

04:43 PM on 02/22/2012

It's painfully obvious that we need to teach more about finance, economics, taxes, money, etc in school. Very few commenters here have a clue about how to interpret what's being proposed.

The current tax rate on companies is 35%. After using the available loopholes, most companies pay no more than 25% (some all the way to 0%, many in the teens).

With this proposal, the rate would be 28%... and the loopholes would be closed. That means the companies are ACTUALLY paying 28% (maybe a little less with some charitable contributions, but then we WANT these companies making donations).

News flash => 28% is HIGHER than 25%. It saddens me that it's so easy to confuse people about very basic numbers...

[stopthemadness69]

06:29 PM on 02/22/2012

Thank you. Thank you. Thank you.

Why people can't see that getting those corporations who pay 0%, and who are among the most profitable by the way, to pay 28% is a good thing is beyond me.


I also can't wait to hear the republicans, who always complain about that too high 35% rate, to start telling us how 28% isn't low enough, because most corporations pay less than that now. Kind of blows their entire talking point out of the water. Maybe that was obama's intention?

[WebbieGuru]

06:44 PM on 02/23/2012

Now here's the tricky question. Why do corporations STILL pay less that the average person?

[imagine2011]

04:32 PM on 02/22/2012

I have to ask democrats this, If you love big government sooooooo much, what the heck are you going to do when this "big government joke" spends all our money, cant borrow any more, makes us lose ALL our credit ratings to zero, the interest rates go up on our now 16 Trillion dollar credit card balance to where we default on the payments and this worldwide debt crisis turns into a DEBT BUBBLE THAT BURST'S, who is going to take care of you then, when the government has NO MORE MONEY TO GIVE YOU?? Just asking.

[Sue-in-Jersey]

05:34 PM on 02/22/2012

I thought that a simplified tax code had bipartisan support? And that it was YOUR team wanting to (prematurely) fixate on bringing down the deficit? My guess is that you posted your comment without understanding the article.

[bigfootphd]

06:14 PM on 02/22/2012

Is this seriously the comment of a sane, educated adult?

[Levonsky]

04:30 PM on 02/22/2012

yea, lower their taxes! And if they don't like it they can move to china.
oh, wait they are already doing that.

[bigfootphd]

06:15 PM on 02/22/2012

You could never lower taxes enough to compete with China, I'm afraid. And you could never cut costs enough to compete with their labor force (unless you want half of the population subsisting on aid or dog food)

[SharedGrowth]

11:23 PM on 02/22/2012

You could lower enough to compete with China for high-value, high-wage operations, just not for low margin, sweatshop operations. See www.sharedeconomicgrowth.org for the math

[crazyindc1984]

04:46 AM on 02/23/2012

You lower taxes here, and set import taxes on goods coming into the US, as our country consumes 25% of all products.
That would attract companies back here.