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The New York Times
Opinion
The Corporate Free
Ride
EDITORIAL,
nytimes.com Posted August 18, 2009
GayPASG e-mail August
20, 2008
Here is a crazy idea to address the
United States’ gaping fiscal deficit: persuade corporate America to start
paying taxes.
An investigation by the Government Accountability Office found that almost
two-thirds of companies in the United States usually pay no corporate income
taxes. Big companies, those with more than $50 million in sales or $250
million in assets, are less likely to avoid Uncle Sam altogether. Still,
about a quarter of them report no tax liability either.
The G.A.O., which looked at tax returns from 1998 through 2005, does not tell us
exactly how so many corporations managed to avoid the taxman. It simply
notes that they were able to record sufficient expenses — salaries, interest and
“other deductions” — to cancel out their taxable income.
We find it hard to believe that some two-thirds of American companies fail to
turn a profit. What we find easier to believe is that corporations
have become increasingly skilled at tax-avoidance strategies, including
transfer pricing — overcharging their American units for products and services
provided by subsidiaries abroad to artificially reduce their profits here.
The first place to look for money to close the budget deficit should be among
the high-income individuals who have been treated so generously by the Bush
administration. But corporate America has been getting a free pass for
far too long. And the seeming ease with which corporations escape the
taxman altogether compounds a fundamental unfairness in the American economy.
Even as corporate profits have soared — reaching a record of 14.1 percent of the
nation’s total income in 2006 — the percentage of these profits paid out in
taxes is near its lowest level since the 1930s.
It is a uniquely American paradox. This country’s corporate tax rates are
among the highest in the industrial world, yet the taxes that corporations pay
are among the lowest. With an enormous budget deficit and pressing demands
for better health care and other social programs, America can no longer afford
free riders.
(Emphasis Added)
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