Q: How much tax do corporations really pay in the USA?


Q: How much tax do corporations really pay in the USA?

A: The U.S. federal corporate tax rate is 35 percent, and that statutory rate is what corporate tax critics cite most often. Additional state corporate taxes bump the overall number up closer to 40 percent.

The statutory rate, however, doesn't reflect the write-offs in the tax code.  The effective tax rate, which is the rate paid after all exemptions, loop-holes, etc, is much lower.  (This also includes the shifting of approx. $2.1 trillion in corporate profits off-shore, but that's the topic for another day)  288 big and profitable Fortune 500 corporations paid an average effective federal tax rate of just 19.4% from 2008 to 2012.  And, in fact, General Electric, Boeing, Verizon and 23 other profitable Fortune 500 firms paid no federal income taxes from 2008 to 2012.

This, in essence, means the US corporations on average pay the same or else than 30 other OECD countries.

Also to consider, studies have shown there is no relationship between cutting corporate tax rates and job growth, according to a recent study by the Center for Effective Government. Twenty-two of the 30 profitable Fortune 500 companies that paid the highest tax rates (30% or more) from 2008 to 2010 created almost 200,000 jobs between 2008 and 2012. The 30 profitable corporations that paid little or no taxes over the three years collectively shed 51,289 jobs between 2008 and 2012.

- originally published in the 8/6/2017 newsletter


Stephanie Lee