A GAO study of effective tax rates has created some comment in the tax policy blog world. For example, Howard Gleckman, Large U.S. Firms Paid a 16.6 Percent Federal Tax Rate (TaxVox):
A new analysis by the Government Accountability Office finds that in 2010 large U.S. corporations paid an average effective tax rate on their worldwide income of 22.7 percent and U.S. federal tax of only about 16.6 percent. The federal rate was less than half of the 35 percent statutory rate.
Large firms that made a profit that year paid an even lower effective rate—an average of 16.9 percent in worldwide taxes and only 12.6 percent in U.S. federal tax.
The always moderate and restrained Linda Beale chimes in with Corporations Never Had It So Good.
William McBride from the Tax Policy Blog doesn’t see it quite that way in GAO Compares Apples to Oranges to Find Low Corporate Effective Tax Rate:
A new study by the Government Accountability Office (GAO) claims the corporate effective tax rate (ETR) was 12.6 percent in 2010, which is about half the standard estimate found in other studies cited by the GAO and summarized here, here, and here. Based on IRS data, the corporate effective tax rate is about 26 percent on average, though it dropped in the most recent year of data, 2009, to a little over 22 percent, due to the recession and temporary tax incentives meant to stimulate investment.
Why the difference?
So how did GAO come up with such a low effective tax rate? Mainly by comparing apples and oranges. Particularly, GAO takes the smallest measure of taxes paid and divides it by the largest measure of net income according to financial statements, even though this net income is not the tax base that the corporate tax was meant to apply to. The corporate tax rate applies to taxable income, as defined in the tax code. According to GAO, taxable income in 2010 was $863 billion for profitable corporations, while financial statement income was $1.443 trillion.
It’s true that effective rates on taxable income will never be as high as the stated rate because of tax credits, but the GAO numbers show a misleadingly low burden.
The Obamacare employer mandate has been delayed. My coverage and a roundup: Don’t fire employee #50 just yet: Obamacare employer mandate delayed until 2015
Jason Dinesen, Do Iowa Taxes Change as a Result of the DOMA Ruling? “The answer is: very little changes on Iowa taxes.”
Trish McIntire, DOMA is Dead
Joseph Thorndike, Milton Friedman Didn’t Believe in Tax Reform (Tax Analysts Blog). Getting rid of loopholes, the argument goes, just makes room for new ones.
Janet Novack, IRS Calls Foul Against Estate Of Late Minnesota Twins Owner Carl Pohlad. “Carl Pohlad’s heirs contend his stake in the MLB club was worth just $24 million. The IRS pegs it at more than 12 times that.”
Zerjav update: I have updated my post on the St. Louis tax advisor who was sentenced to 18 months in prison to include information from a U.S. Attorneys press release on the details of how the evasion was done.
David Brunori, Cuccinelli’s Corporate Tax Plan Does Not Go Far Enough (Tax Analysts Blog:
The state would be far better off repealing the tax and either 1) reducing spending by $800 million, or 2) finding other sources of revenue. An increase in the personal income or sales tax would be a better idea than trying to tax corporate income.
Tax Justice Blog, Bad Budgets Become Law in Ohio and Wisconsin. That probably means the opposite.
Peter Reilly continues to report breaking news from the Battle of Gettysburg: Did Doris Kearns Goodwin Blow It At Gettysburg ? I am insanely jealous. I assume he will torture me with coverage of today’s 150th anniversary of Pickett’s charge.
News you can use. The Screaming at EY Has Stopped (Going Concern)
I don’t see what his orientation has do with anything. Century old barn may’ve been started on fire by flaming raccoon (Radio Iowa)