[Vision2020] corporate tax revenues fall

[Mark Solomon]

Visionaries,
The national trend cited in the following article from today's NY 
Times is mirrored in Idaho where the State Tax Commission annual tax 
burden report finds that Idaho corporations pay 29% less than the 
national average of corporations in other states. This race to the 
bottom was accelerated by the Idaho Legislature's tax cut of 2001 to 
the detriment of government services and state employees.

Mark Solomon



Study Finds Accelerating Drop in Corporate Taxes
By LYNNLEY BROWNING

Published: September 23, 2004



America's largest and most profitable companies paid less in 
corporate income taxes in the last three years, even as they 
increased profits, according to a study released yesterday.

  Companies have always used write-offs, depreciation, deductions and 
loopholes to lower their taxes, but the study, by Citizens for Tax 
Justice and its affiliate, the Institute on Taxation and Economic 
Policy, suggested that tax breaks and subsidies enacted during the 
Bush administration had accelerated the decline in tax payments.


The study also cited the proliferation of abusive tax shelters and 
increasingly aggressive corporate lobbying as fueling the decline in 
tax payments by corporations.

  The study was done by nonprofit research and advocacy groups that 
have been supported in part by labor unions. They contend that the 
tax system favors wealthy corporations and individuals.

The study, Corporate Income Taxes in the Bush Years, surveyed public 
filings by 275 of the nation's largest and most profitable companies, 
based on revenue from the Fortune 500 list of 2004. The 275 companies 
reported pretax profits from operations in the United States of $1.1 
trillion from 2001 through 2003, the study said, yet reported to the 
Internal Revenue Service and paid taxes on half that amount.

  Robert S. McIntyre, the lead author of the study, wrote, "The fact 
that America's companies were allowed to report less than half of 
their actual U.S. profits to the I.R.S., while ordinary wage earners 
have to report every penny of their earnings, has to undermine public 
respect for the tax system."

  The 275 companies surveyed include nearly all of the 2004 Fortune 
500 companies that were profitable from 2001 through 2003. The list 
excluded those that reported losses in any year, including  General 
Motors and  Ford; certain companies whose finances were considered 
too opaque to decipher; and about 25 companies to maintain a balance.

The study cited, among other things, tax breaks enacted in 2002 and 
2003 as prompting the decline in corporate payments. Such tax breaks, 
as used by the 275 companies, totaled more than $175 billion over the 
last three years, including $71 billion last year, up from $43.4 
billion in 2001. That compares, roughly, with $98 billion in tax 
breaks for the top 250 profitable companies over 1996 through 1998, 
according to a similar study by Citizens for Tax Justice in 2000.

Not all experts agreed with the study's findings. William W. Beach, a 
tax policy expert at the Heritage Foundation, a conservative research 
group in Washington, said that even though the study surveyed the top 
275 companies, he did not find it "typical of corporate America," 
adding that smaller and midsize businesses were "paying a lot in 
taxes."

  According to the study, some 28 corporations paid no taxes from 2001 
to 2003, despite having profits in the period of nearly $45 billion.

  Industry sectors that paid the lowest taxes or no taxes included 
aerospace and military, telecommunications, transportation, and 
industrial and farm equipment.

  The 2000 study found that from 1996 to 1998, 11 of the 250 largest 
and most profitable companies paid no taxes, even though all reported 
profits. The earlier study found that the 250 companies showed a 23.5 
percent increase in pretax profit, while the tax payments rose 7.7 
percent.

  The current study seemed to echo government data. Commerce 
Department figures showed that pretax corporate profit rose 26 
percent from 2001 to 2003 but that corporate tax payments fell 21 
percent.

Corporate taxes as a share of the national economy are at their 
lowest sustained level since World War II, the study said, and 
financed only 6 percent of government expenses in the last two fiscal 
years.

  The current study found that nearly one in three companies, or 82, 
of the 275 examined paid no federal income tax in at least one year 
from 2001 to 2003, the period covered by the study. In the period, 82 
companies had pretax profit of $102 billion.

Last year, 46 of the 275 companies surveyed paid no federal income 
tax, up from 42 companies in 2002 and 33 in 2001, according to the 
study. Over all, the number of companies that paid no taxes increased 
40 percent during the period.

The current study attributed lower corporate payments in part to 
legislation supported by President Bush and enacted by Congress in 
2002 that increased accelerated depreciation, an accounting move that 
allows profitable companies to write off capital investments and 
claim tax deferrals. Accelerated depreciation was intended in part to 
encourage capital investment, but the study argued that it had done 
the opposite. Capital investment by corporations dropped 12 percent 
in 2002 and 3 percent in 2003, the years when Congress enacted the 
new accelerated depreciation rules.

  As a result, Mr. McIntyre concluded, "the $175 billion in revenues 
lost to the 2002- and 2003-enacted tax breaks appears to have been 
exceedingly poorly spent."

Mr. Beach disagreed, saying that rates of capital investment were at 
historic highs. "We're seeing an investment surge that's so strong 
that you have to go back to the 1960's before you see a comparable 
one."
-------------- next part --------------
An HTML attachment was scrubbed...
URL: http://mailman.fsr.com/pipermail/vision2020/attachments/20040923/7d5231db/attachment.htm