At the same time Congress is looking to reduce federal spending by cutting money for food stamps, it is letting some of the biggest, most profitable U.S. companies avoid paying tens of billions of dollars in federal income taxes each year. Corporations complain that the United States has one of the world's highest corporate income tax rates at 35 percent, but that is only on paper. Year after year, Congress' refusal to plug tax loopholes is shifting the nation's tax burden onto individuals and families and skewing national priorities in harmful ways.
A new Government Accountability Office report finds that the average tax rate for the country's large, profitable businesses was just 12.6 percent in 2010, a lower rate than paid by many teachers and police officers. The GAO report looked at taxes paid by profitable U.S. corporations with at least $10 million in assets. It found that companies' incredibly low federal income tax rate is only slightly increased to 16.9 percent when foreign, state and local taxes are included.
The result: The federal Treasury is losing upwards of $180 billion a year, an earlier GAO report found. And in 2012, Citizens for Tax Justice documented that 30 of the nation's largest multinational companies paid no federal income taxes over a recent three-year period despite raking in more than $160 billion in profits. It's an epidemic of shirking tax responsibility that is starving democracy by denying federal coffers the money necessary to pay for current needs and future investments.
Corporate profits are soaring and represent a larger share of national income than at any time since World War II. But corporate taxes make up just 9 percent of federal tax revenue, down sharply from a high of 32 percent. Everyone else is paying a proportionately larger share, including struggling families who don't have an army of tax lawyers and lobbyists working to lower their tax bills through loopholes and gimmicks.
The problem is getting needed attention because Sens. Carl Levin, D-Mich., and Tom Coburn, R-Okla., have been pounding away at it in a spirit of bipartisanship. They ordered the GAO study and held hearings to highlight the need for corporate tax reform. Last year, a Senate committee showed how Microsoft had shifted 47 cents of every dollar in U.S. sales revenue offshore, which helped it avoid paying taxes on more than $20 billion in income. Apple Inc., in a Senate hearing earlier this year, was found to make itself effectively stateless for income tax purposes by creating offshore corporations through which to filter profits, avoiding U.S. income taxes on more than $74 billion in profits from 2009 to 2012.
Corporate tax avoidance is rot in the system that undermines the collective responsibility to pay the costs of government. There should be a bipartisan push to end these well-documented tax loopholes that is not revenue-neutral, as some Republican lawmakers have demanded. It should bring in additional tax dollars that should have been funding government operations all along. Maybe then food stamps for hungry Americans won't be on the chopping block.