Thursday, August 14, 2008

2/3 OF CORPORATIONS PAY NO TAXES

Ever wonder what helps contribute to our bloated budget deficits? Check this out ... According to the Government Accounting Office two-thirds of U.S. corporations, and 68% of foreign companies, paid no federal income taxes between 1998 and 2005.

After the GAO examined samples of corporate tax returns - as requested by Congress - they found that between 1998 and 2005 about 1.3 million U.S. companies and 39,000 foreign companies who did business in the U.S. paid no income taxes.

Their combined revenue? $2.5 trillion.

How does this happen? Pretty simple. Much of the tax evasion can be attributed to something called transfer pricing. For example, revenue generated here in the U.S. is transferred abroad to low tax countries (hello Cayman Islands) while high cost expenses (like R&D) are claimed here in the United States. British drug maker GlaxoSmithKline got caught doing this a few years back and ended up paying $3.4 billion to the IRS.

What could help here is if the IRS budget for corporate tax enforcement were enhanced. But with the Republican-led tax cut jihad, budgets and resources for the IRS have been cut in real terms. The result? According to an OMB report (pdf file here), the number of IRS revenue agents and officers who perform audits like the one done on GSK has decreased by 40 and 30 percent over the past ten years.

My friends, you can't catch the criminals if you take the cops off the streets.

Why is all of this important? Because when corporations reduce what they pay, the tax burden is then shifted to you and me (and our grandkids in the form of our $9.3 trillion national debt). It also helps explain record corporate profits. The graphs below are a bit dated, but they show what's been happening over the past 20 years.


- Mark

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