Corporate Law Blog

Debate over how much corporations should pay in taxes continues

It's been suggested that corporate tax rates in the United States are at 39.1 percent - which would be the highest among nation members of the Organization for Economic Cooperation and Development. The argument as to how much is paid, however, is far from settled. For example, this figure does not necessarily take into account deductions and credits.

Critics of our corporate tax structure have reported that 78 companies paid no federal income tax for at least one year between 2008 and 2010.  (As one commentator pointed out, it may not be fair to focus on one single year when it comes to the overall tax situation for corporations.)  Also, there may currently be as much as $2 trillion in corporate offshore profits that are not being taxed by the U.S. government.  Rather than suggesting the rate is at 39.1 percent, some critics claim that the effective federal tax rate for corporations is 13 percent.  (It presumably would be 17 percent if we were including with this figure state and local taxes.)

We need to keep in mind that the numbers critics provide can be disputed.  One economist, for example, would place the effective tax rates at 36.2 percent. Another economist felt it was in the upper 20 percent range.  Even the Government Accountability Office acknowledges that the effective tax rate when viewed over several years averages out to 22.9 percent.

The debate as to how much is paid generates a great deal of controversy.  Considering how complex corporate taxation issues can be and how much money is at stake, there are no easy answers to the question of what should or should not be paid in taxes by companies.  

 Still, as tax attorneys in Kentucky we are responsible for helping our clients receive every tax break as is allowed by the tax code.  Taxes can result in lost profits for businesses which ultimately may lead to other consequences such as workers being laid-off.  Therefore clients will need to be advised concerning their options to determine whether certain tax breaks can be allowed.

Source: The New York Times, "Effective Corporate Tax Rates," Bruce Bartlett, Nov. 26, 2013