Corporate taxes have declined in many nations.
Declining US Corporate Income Taxes 1950-2004
Corporate taxes in the US have also been declining over time as a percentage of their profits. During the late 1990s when business was booming, 61 percent of 2 million companies surveyed by the Internal Revenue Service (IRS) paid no federal income taxes and 94 percent paid less than 5 percent of their income.
Some of the largest and most profitable corporations in the nation pay a very small percentage of tax compared with their declared profits (see figure below). In fact some end up getting more money from the government than they pay in taxes giving them a negative tax rate. “Nearly 95 percent of corporations now pay less than 5 percent of their income in taxes. This is despite a tax rate that officially stands at 35 percent.”
Of 275 Fortune 500 companies in a Citizens for Tax Justice study, 82 companies paid no tax in at least one year between 2001 and 2003 and 28 effectively had negative tax rates including Boeing. Corporate federal taxes fell from $207 billion to $132 billion during the first three years of the Bush administration (2000-2003).
Figure: Corporate Profits vs Taxes, 1999-2000
The situation is even worse at the state level. Since 1978 the corporate contribution to state and local taxes has declined from 0.47 percent of GDP to 0.29 percent. “That 38 percent decline represents a $56 billion loss in state and local corporate tax revenues over just the past three years.”
An analysis by the groups Citizens for Tax Justice and the Institute on Taxation and Economic Policy found that “252 of America’s largest and most profitable corporations” – all Fortune 500 companies – paid an average of 2.3 percent tax on their profits compared to a statutory state corporate tax rate of 6.8 percent. “A shocking 71 of the 252 companies managed to pay no state income tax at all in at least one year from 2001 through 2003—despite telling their shareholders they made $86 billion in pretax U.S. profits in those no-tax years. Twenty-five of these companies enjoyed multiple no-tax years.” Some paid no net tax over the three years including Toys “R” Us, AT&T, Boeing, Eli Lilly and Merrill Lynch. Over three years these 252 companies avoided $41.7 billion in state taxes.
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