While the rest of America is struggling through its monster recession, new figures from the Center on Policy and Budget Priorities shows that US corporations are paying less tax than ever before. Tax revenues are near historic lows.
It's a point made by David Leonhardt in the New York Times: "Of the 500 big companies in the well-known Standard & Poor's stock index, 115 paid a total corporate tax rate – both federal and otherwise – of less than 20 percent over the last five years, according to an analysis of company reports done for The New York Times by Capital IQ, a research firm. Thirty-nine of those companies paid a rate less than 10 percent. Arguably, the United States now has a corporate tax code that's the worst of all worlds. The official rate is higher than in almost any other country, which forces companies to devote enormous time and effort to finding loopholes. Yet the government raises less money in corporate taxes than it once did, because of all the loopholes that have been added in recent decades.".
Indeed GE has the best tax department in the world. And one way you do it is by declaring profits in countries with low tax rates. The perverse part about this system is that it encourages companies to spend more, for less return. So automotive companies will produce more cars than they can sell and airlines will buy more planes than they need. It's a winner for them because they pay less tax. But any system like that cannot generate real economic growth.
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