Representation Without Taxation: Study Says Most Corporations Avoid US Income Tax
WASHINGTON — Two-thirds of U.S. corporations paid no federal income taxes between 1998 and 2005, according to a new report from Congress.The study by the Government Accountability Office, expected to be released Tuesday, said about 68 percent of foreign companies doing business in the U.S. avoided corporate taxes over the same period.
Collectively, the companies reported trillions of dollars in sales, according to GAO’s estimate.
More than 38,000 foreign corporations had no tax liability in 2005 and 1.2 million U.S. companies paid no income tax, the GAO said. Combined, the companies had $2.5 trillion in sales. About 25 percent of the U.S. corporations not paying corporate taxes were considered large corporations, meaning they had at least $250 million in assets or $50 million in receipts.
The GAO said it analyzed data from the Internal Revenue Service, examining samples of corporate returns for the years 1998 through 2005. For 2005, for example, it reviewed 110,003 tax returns from among more than 1.2 million corporations doing business in the U.S.
I can already hear the wingnuts: But if you tax the corporations, they’ll just pass the costs on to the little guy! Well, hell, at least the taxes will get paid and we won’t have a deficit! Besides if corporations raise the cost of their goods and services too much, I won’t buy from them and they’ll lose money.
1 response so far ↓
1 hopkinswjIII // Aug 30, 2008 at 7:54 pm
Companies cannot just raise prices because their taxes have increased. Most operate in very competitive markets and have to go with the prices that the market dictates. The effect of raising taxes will be to cut into their profit margin which will make them look for ways to reduce costs. Most likely it will result in job losses be4 it causes prices to go up.
However, increases in oil prices, will impact most companies costs for doing business; raw materials, energy, etc. Since all other companies will face the same challenges, they will most likely raise prices and pass on the costs to the consumers. This is not a definite though. If one company in that market can operate at a slimmer margin, they may try to steal market share and keep their prices low.
Basically, there is a lot more that goes into the decision to raise prices than the taxes. In a robust market with low barriers to entry and attractive profit margins, increases in taxes will not directly impact prices that much if at all.
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