Over Two Thirds Of Corporations Pay No Federal Income Tax

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The traditional partisan debate over whether to raise or cut taxes– especially for high-income earners– ignores an independent solution that should at least be tolerable to both sides: make the high-income earners– especially corporations– pay their taxes in the first place.

Democrats would be happy to see the extra tax revenue coming from the 1% and Republicans should be willing to admit that even if they shouldn’t pay more, corporations should at least be paying as much in taxes as working poor and middle class Americans are. But thanks to a complicated tax code full of so many lobbied-for loopholes, many corporations pay no federal corporate income tax at all, and some even get money back from the government to the tune of millions of dollars.

Last year, the blogosphere waxed indignant when the news broke that General Electric (the sixth largest company in the United States with over $700 billion in assets) not only didn’t pay taxes in 2010, but had a tax rate of negative 76.6% in tax refunds on $4.2 billion in profits. If you paid taxes in 2010, money was taken from you and given to a giant, wealthy, multinational conglomerate that already has billions. How does that feel? More recently, we learned this year that from 2002 to the present, General Electric’s average tax rate was just 2.3%. (In case you’re interested, here’s a list of the top recipients of donations from General Electric employees for the 2012 election cycle.)

And General Electric isn’t alone. Twenty-nine other major corporations joined GE in paying no taxes between 2008 and 2010, including Wells Fargo, Verizon, Boeing, and DuPont. In fact, shockingly over two thirds of corporations in the United States pay no income tax:

“In 1986, about 24 percent of corporations were what’s known as nontaxable businesses — meaning the companies themselves pay no federal income taxes — instead passing on the earnings to individual investors to pay taxes on. By 2008, these businesses accounted for about 69 percent of all corporations, a designation that can save companies hundreds of millions of dollars in a single year.”

Again, the partisan debate over tax policy overlooks this strange and preposterous state of affairs. No politician in either party would ever say they believe in an income tax code that is bewilderingly complicated and full of loopholes written by lobbyists, yet that is what we have. Instead of focusing on what our politicians disagree about, Americans should focus on what they agree on– at least rhetorically– and hold them to their word. If Democratic legislators say they are standing up for the little guy against the entrenched interests of corporate America, make them support bills that close loopholes in the tax code. If Republican legislators say they oppose wealth redistribution, make them oppose it regardless of which direction it’s going by reforming a tax system that allows money to be taken from a hardworking, taxpaying coal miner with a family and a mortgage and redistributed to a wealthy, multinational corporation.

In tax policy as well as so many other areas of public policy, Independents can lead the way forward by setting aside the things we disagree about for just long enough to make sure the things most of us would agree on actually get done by those who represent us.