"The Corporate Tax Rate Is Lowest in Decades; Is Business Paying Its Fair Share?"

[applegrove]

The Corporate Tax Rate Is Lowest in Decades; Is Business Paying Its Fair Share?


By Christopher Matthews

http://business.time.com/2012/02/06/the-corporate-tax-rate-is-at-its-lowest-in-decades-is-big-business-paying-its-fair-share/

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As the nation frets over slow growth and large budget deficits, much has been made over how much Americas are and should be paying in income tax. President Obama and Democrats have argued that the wealthiest among us are not paying their fair share. They say the spoils of the globalization and the internet revolution have gone almost exclusively to the very wealthy, and that, in times of crisis, more should be asked of those who can afford to give. Those on the right counter that the wealthy pay their fair share and, more, that the top one percent pay a huge percentage of federal income tax receipts.

But there is another source of federal revenues that receives less attention: corporate income taxes. According to the Wall Street Journal’s recent study of Congressional Budget Office numbers, corporations are paying an effective rate of 12.1%, the lowest in at least 40 years. So why are some of the biggest and most powerful entities in our society getting away with paying so little? The story is complicated, but the biggest factor in the recent collapse in corporate tax receipts appears to be a set of tax breaks built into recent stimulus efforts.

In 2010 and 2011, companies were allowed to deduct the full cost of the purchases of new equipment, while normally these costs would be expensed over several years. In 2012, this deduction will go down to 50% and be eliminated altogether thereafter, causing the effective tax rate to return to roughly the 25.6% average effective tax rate corporations paid since the late 1980s, according to CBO forecasts.

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[applegrove]

1. And if corporations are paying so little in taxes it means less tax

Last edited Tue Sep 25, 2012, 08:49 PM - Edit history (1)

revenue for governments. So too with corporations restructuring employment markets so that there are fewer good jobs, many replaced by a computer (more efficiency they call it) in the last 30 years. Less government revenue that way too. More ways the GOP is 'starving the beast'.

[dipsydoodle]

2. The purpose of year one full writing down allowance,

which if taken advantage of effectively charges capital expenditure as a cost against revenue , is / was to encourage companies maintain / increase capital expenditure which is investment.

Increased capital goods sales must presumably in some way increase employment. Exactly where those goods are purchased from is a separate issue : a red herring in this context.

Even if not charged in full against revenue year one and depreciated over a number years instead the amount of tax not paid probably aggregates to more or less the same figure. The cost of doing business is taxable : only the benefits i.e net profits.