Large Corporations May Receive More Tax Breaks
The House and Senate continue to move forward on a substantial corporate tax bill. The Foreign Sales Corporation and Extraterritorial Income Exclusion (FSC/ETI) bill is designed to remove certain corporate tax subsidies that were ruled illegal by the World Trade Organization. Repealing the subsidies would increase federal revenue by approximately $50 billion over the next 10 years. (The bill is currently in conference. See a summary of the differences between the House and Senate version.)
Rather than using the revenue to reduce the massive $422 billion deficit, or to offset some of the $146 billion price tag of the tax-cut extensions passed last week (see "Congress Spends $146 Billion to Extend Certain Tax Provisions Without Offsets" in this issue), some in Congress and the Bush administration are seeking instead to replace the banned subsidies with $50 billion in new corporate tax breaks. This would be on top of the $13 billion in tax breaks for corporations already passed as part of the "middle-class" tax package.
The additional cuts would come at a time when corporate tax revenue is at historic lows and when many of the largest and most profitable corporations currently do not pay their fair share of taxes. The latter is confirmed by a new study recently released by Citizens for Tax Justice and the Institute on Taxation and Economic Policy. The study by Bob McIntyre and T.D. Coo Nguyen looks at federal income taxes paid by 275 of the nation's more profitable Fortune 500 companies from 2001-2003 and reveals that:
- Eighty-two of the 275 companies paid zero or less in federal income taxes in at least one year from 2001-2003.
- The companies who paid "less" experienced multiple tax-free years. In the years they paid no income taxes, these companies earned approximately $102 billion in pretax U.S. profits. Due to excessive tax breaks, the firms were handed tax rebate checks from the U.S. Treasury totaling $12.6 billion.
- Loopholes and other tax subsidies enjoyed by the 275 companies reduced federal revenues by $43.4 billion in 2001, $60.8 billion in 2002, and $71 billion in 2003.
- In three years, these companies received $175.2 billion dollars worth of tax breaks. Half of these tax break dollars went to just 25 of the companies.
The report, "Corporate Income Taxes in the Bush Years," also includes other findings highlighting how U.S. tax policies are currently geared toward business interests. Federal income taxes pay for many important programs and services, so when corporations get special advantages, it both increases the deficit and reduces government spending for services most Americans rely upon.