If true, this is pretty bad news. Because more than anything, it suggests that if all the loopholes are closed, American corporations may not even be able compete when they have to play by the rules.

From the AP:

WASHINGTON (AP) – 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.

So why is this happening?

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.


[Sen. Byron] Dorgan and [Sen. Carl] Levin have complained about companies abusing transfer prices – amounts charged on transactions between companies in a group, such as a parent and subsidiary. In some cases, multinational companies can manipulate transfer prices to shift income from higher to lower tax jurisdictions, cutting their tax liabilities.

And McCain wants even more corporate tax breaks?

How about we close these loopholes and only then start talking about tax breaks when everybody’s paying their fair share? Does that sound like a plan everybody can get behind?

Home Business 67% Of American Corporations Pay No Taxes?