Corporate Taxes As Percentage Of Profits Now Lowest In Decades

Corporate Taxes As Percentage Of Profits Now Lowest In Decades

As a percentage of ever-growing profits, corporations are paying less in taxes than they have in decades.

Thanks in part to federal tax breaks, corporations paid out just 12.1 percent of their 2011 profits in taxes, according to the Congressional Budget Office. That's well below the country's top marginal corporate tax rate of 35 percent -- and as The Wall Street Journal notes, it's the lowest percentage corporations have paid since 1972. During the two previous decades, a period that included the economic prosperity of the 1990s and the housing boom of the George W. Bush administration, corporations were paying an average percentage almost twice as high.

The CBO's numbers undercut a popular conservative claim -- that the United States places a higher tax burden on its corporations than almost any other first-world nation -- and arrive at a time when national politicians are engaged in a fierce rhetorical battle over how much wealthy institutions and individuals should pay to the government.

Corporations reported a combined $1.97 trillion in profits in the third quarter of 2011. As recently as June, they were also believed to be sitting on more than $2 trillion in cash hoardings. Most of that money has not been touched by taxation, even though the federal government has experienced budget shortfalls of more than $1 trillion for each of the past four years, and is scrambling to cut back on staff and services as a result. Meanwhile, the money isn't going to employees either, as real wages for most Americans declined in 2011 in spite of strong corporate balance sheets.

There are any number of methods available to a firm looking to avoid paying the full tax rate. Companies can take advantage of industry subsidies, restructure their operations so as to sidestep certain taxes, and offer workers payment in the form of stock options, which then allows the company to claim a greater deduction. Many companies also move assets overseas where they can't be taxed. In 2008, 2009 and 2010, thirty major U.S. corporations, including General Electric, Boeing, Verizon and Wells Fargo, used so many tax-avoidance techniques that they ended up paying no income taxes at all, according to a report last year from Citizens for Tax Justice.

President Obama has denounced low corporate taxes in specific instances while at the same time downplaying the importance of raising the corporate tax rate itself. The president is said to be planning a major revision of the corporate tax code sometime in February.

Meanwhile, much of the country continues to struggle financially, with nearly 13 million people looking for work, 49 million people officially in poverty, and almost half of households lacking the kind of savings they would need in an emergency.

Popular in the Community