WEST PALM BEACH, Fla., April 14, 2012 - Every American knows April 15 (or April 17 this year due to special circumstances) is the last day to file their U.S. federal tax return, or at least to file for an extension of the tax return. Millions of American’s are spending the weekend agonizing over their taxes, stepping up and paying their portion – or maybe more than their portion – of their bill for living in the United States.
Unless, of course, those Americans are wildly profitable corporations. A new study by the non-partisan, non-profit research group Citizens for Tax Justice (CTJ) shows that 26 large American corporations paid no federal income tax from 2008 – 2011, despite earning large profits.
What kind of numbers are we talking about? From 2008 to 2011, Pepco Holdings recorded profits of $1,263,000. Tax rate? -39.5%. General Electric recorded profits of $19,616,000 for the same period, and had a tax rate of -18.9%. Verizon Communications earned $19,783,000 and had a tax rate of -3.8%.
The study also shows some high earners who paid taxes, but at a ridiculously low rate. Wells Fargo’s profits from 2008 to 2011 were $69,158,000 and their tax rate was 3.8%. The biggest loser in the 30 companies CTJ studied was DuPont, which earned $2,995,000 and paid a 10.9% tax rate, or $325,000 in federal taxes.
The average tax rate for a corporation in the United States is 35%. If all 30 of the companies in the study paid their full 35% corporate rate, they would have increased U.S. Government tax revenue by more than $78 billion.
Revenue from corporate income taxes fell from between 5 and 6 percent of GDP in the early 1950s to 1.3 percent of GDP in 2010. In 2011, the government estimates it will account for 1.2 percent of GDP.
By way of comparison, individual income taxes have been the largest source of federal revenue since 1950, bringing in an average of 8% of GDP. According to the Small Business Administration, American small businesses pay an effective rate – the rate after all deductions – of 19.8%.
Of course, the highest earning individuals pay a 35% tax rate. Maybe they should incorporate and seek ways to avoid those taxes.
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