In a stunning report released by the United States Government Accountability Office in July 2008, Americans learned that many corporations, including those with assets over $250M, reported no tax liabilities. In fact, from 1998-2005, 72% of foreign-controlled domestic corporations (FCDC's), and 55% of US-controlled corporations (USCC's), reported zero tax liability for at least one of those years.
In total, two-thirds of the corporations doing business in the U.S. paid no taxes from 1998-2005, while collectively reporting $2.5 trillion dollars in sales.
John McCain's official website would make it seem as if corporate taxes are somehow crippling American business. He calls for a plan that would:
Cut The Corporate Tax Rate From 35 To 25 Percent. A lower corporate tax rate is essential to U.S. competitiveness. America was once a low-tax business environment, but as our trade partners lowered their rates, America failed to keep pace, leaving us with the second-highest rate among the world's advanced economies.
The rate may be high on paper, but in the reality of business deductions, loopholes, and special tax breaks, it's clearly not the rate being paid by corporate America -- not even close.
Barack Obama also calls for corporate tax cuts, but with the caveat that the benefactors of reduced taxes create American jobs. His plan would also "repeal tax breaks and loopholes that reward corporations that retain their earnings overseas and use those savings to lower corporate tax rates for companies that expand or start operations in the United States". Unlike McCain, Obama seems to be keenly aware that special interests, and not zero profit or net losses, are responsible for the high number of U.S. corporations that do not pay taxes.
While McCain's plan calls for deeper cuts on taxes that are largely mythical -- since they're not actually being paid -- and would allow even more deductions, Obama's plan takes a much more considered approach, including:
Reforming international tax loopholes: including reforming deferral to end the incentive for companies to ship jobs overseas and closing the offshore pension loophole; Closing domestic tax loopholes: including clarifying the economic substance doctrine and increasing reporting of capital gains to close the tax gap; Eliminating special tax breaks for oil and gas companies: including repealing special expensing rules, foreign tax credit benefits, and manufacturing deductions for oil and gas firms; Closing other loopholes: including taxing carried interest as ordinary income, and closing the CEO pay loophole.
In their final debate of the election season, McCain asked why Obama would want to raise taxes on even 5% of the population. A better question might have been why so many U.S. corporations aren't paying at all.