Most US Companies Don’t Pay Federal Income Tax

Several story locations on this one:

Some collected tidbits from each of the stories:
  • The study by the Government Accountability Office, expected to be released Tuesday, said two-thirds of U.S. corporations paid no federal income taxes between 1998 and 2005, and about 68 percent of foreign companies doing business in the U.S. avoided corporate taxes over the same period.
  • An outside tax expert, Chris Edwards of the libertarian Cato Institute in Washington, said increasing numbers of limited liability corporations and so-called "S" corporations pay taxes under individual tax codes.
  • "Half of all business income in the United States now ends up going through the individual tax code," Edwards said.
  • 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.
  • Lawmakers are trying to find ways to close the "tax gap", which accounts for $345 billion in legally owed but uncollected federal revenues each year.”
Many lawmakers on the right are probably using studies like this to argue that the US should have drastic cuts in the corporate tax rate in order to encourage multinational companies to report more income in the US as opposed to other jurisdictions. This practice is called transfer pricing.
What are your views on transfer pricing and tax levels for corporations? Should there be more restrictions on capital? Should restrictions at least mimic the restrictions that face the flight of labour? Should corporations pay more taxes?
Provide your comments below.

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