beyond the headlines: what corporations really pay in income taxes
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Beyond the Headlines: What Corporations Really Pay in Income Taxes. Presentation by Scott Hodge & Will McBride 202-464-6200 www.TaxFoundation.org. 1. U.S. Continues to Fall Behind by Standing Still. But Nobody Pays That U.S . Business Has High Tax Rates but Pays Less --New York Times. - PowerPoint PPT PresentationTRANSCRIPT
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Beyond the Headlines: What Corporations Really Pay in
Income Taxes
Presentation byScott Hodge & Will McBride
202-464-6200www.TaxFoundation.org
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Statutory U.S. Corporate Tax Rate Compared toOECD Averages 1981 to 2010
U.S. Rate
Weighted Average of Non-U.S. OECD Nations
Simple Average of Non-U.S. OECD Nations
Source: Tax Foundation calculations based on OECD and IMF data
%
U.S. Continues to Fall Behind by Standing Still
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Corporations Have Been Decliningas a Share of Business Forms
C-Corporations S-Corps/Partnerships
Mill
ions
Source: IRS, Statistics of Income
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$0
$200
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$1,000
$1,200
$1,400
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$2,000
More Business Income is Now Taxed Under the Individual Tax Code than Corporate Code
Net Receipts in Billions of 2009 Dollars
Source: IRS, Statistics of Income
Pass-Through Income
Corporate Income
BUT NOBODY PAYS THATU.S. Business Has High Tax Rates but
Pays Less --New York Times
Two New Tax Foundation Reports on Corporate Effective Tax Rates
“Beyond the Headlines: What Do Corporations Pay in Income Tax?” – William McBride
IRS data shows that largest U.S. companies pay 68% of all corporate income taxes.
IRS data shows that corporate ETR has averaged 26% since 1994.
Including foreign income taxes, total ETR is close to statutory rate of 35%.
“U.S. Corporations Suffer High Effective Tax Rates by International Standards” – Phillip Dittmer
Survey of 13 most recent studies finds that ETR in the U.S. is high globally by any measure.
Source: IRS;Doesn’t add up to 100% due to losses
1,900 Largest Companies pay 68% of All Corporate Income Taxes
Source: IRS
Corporate Income and Taxes Fluctuate with the Economy
Effective Corporate Tax Rate Has Averaged 26% Since 1994
Contribution of Various Credits in Reducing Effective Tax Rate, 2008
Including Foreign Taxes and Foreign Income
Foreign tax credit is a credit for almost all foreign income taxes paid.
Foreign tax credit in 2008 ≈ $100 billion.
Including foreign taxes paid, as well as foreign income (both deferred and non-deferred) the overall effective tax rate on the worldwide income of U.S. corporations is about 33%.
Very close to the statutory rate of 35%.
Contribution of Various Credits in Reducing Effective Tax Rate for a
Sample of Industries, 2008
Rates and Credits as a Share of Taxable Income
All Sectors
Mining
Manufacturing
Educational
Services
Finance and
Insurance
Statutory U.S. Federal Rate 35.0% 35.0% 35.0% 35.0% 35.0%- Foreign tax credit -10.7% -14.5% -16.9% -0.3% -2.9%
- General business credit -1.2% -0.2% -1.2% -0.1% -0.7%- Other tax credit -0.2% -0.7% -0.1% -0.0% -0.0%
Effective U.S. Federal Rate= 22.8% 20.2% 16.8% 34.0% 32.5%
How does the U.S. Compare Internationally?
New Tax Foundation Study surveys 13 recent academic studies on effective tax rates, finds that: U.S. consistently ranks among the top
five highest effective tax rates on multiple measures.
Only nation with a higher effective tax rate in each study is Japan.
Three Methodologies, One Answer: U.S. Effective Rate is Nearly the
Highest in the World Sample of financial reports (4 studies)
ETR = 27% in the U.S. versus 19.9% elsewhere.
Hypothetical firm (5 studies) EATR = 29.8% in the U.S. versus 22.3%
elsewhere. Average tax cost for start to finish profitable
investment over its life. Hypothetical firm (4 studies)
EMTR = 26.3% in the U.S. versus 18.2% elsewhere.
Tax cost on the final dollar of a break even investment over its life.
Bottom Line U.S. federal corporate effective tax
rate (ETR) is about 26%. Overall ETR on worldwide income of
U.S. corporations is 33%, inclusive of foreign taxes paid on foreign income.
Does not vary much across industry or company size, when foreign taxes are accounted for.
All recent studies find the U.S. corporate ETR is nearly the highest in the world.
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For More Information Contact:
Scott Hodge or Will McBride202-464-6200
www.TaxFoundation.org