If you listen to the corporate lobbyists, and the right-wingers who plead their cases for them in Congress and in the media, you'd think that corporations are so heavily taxed that it is threatening their ability to continue to conduct business and be competitive in world markets. But is that really the case? This blog has often pointed out two obvious shortcomings in the corporate whine: first, the corporate statutory rate of 35% is honored in the breach--most corporations pay actual tax rates so significantly lower than 35% that the statutory rate is an illusion; and second, as far as global competitiveness is concerned, the corporate tax rate is the only significant tax that US corporations pay, whereas most other countries have both corporate income taxes and VAT taxes, often paid at each transactional stage of production.
A site called "NerdWallet" provides considerable information based on analysis of the financial statements of companies, providing greater transparency for investors and, lucky for us, for those of us interested in tax facts. See, e.g., the NerdWallet study, Top Companies Paid 9% Tax Rate (July 24, 2012).
Because tax provision includes both domestic and foreign, current and deferred taxes, NerdWallet researched further to find how much was actually paid by these American companies to the U.S. federal government in the most recent tax year. By dividing the current portion of federal taxes by pre-tax income, NerdWallet was able to calculate the percentage of these companies’ earnings that was paid to the U.S. government. For the ten American companies with highest earnings in the most recent fiscal year, this number averaged 9%. NerdWallet Study (emphasis added).
A press release about the study notes just how much corporate taxation has shrunk as a source of revenue in the US, as corporations pay lower rates than ordinary Americans.
A new NerdWallet study found the 10 most profitable U.S. companies paid an average of just 9% in federal taxes last year. These low rates are particularly shocking given that the official tax rate is 35%. The study also revealed that more than half of the 500 largest U.S. companies paid a lower tax rate than the average American. NerdWallet press release (July 30 2012).
NerdWallet also has a very useful tool for seeing what each major corporation of the top 500 actually pays in taxes, available here. You can scroll through a list of corporations to select a particular one of interest, and the tool will show the actual rate of taxes paid to the U.S. government, the compensation paid to the CEO, and the average compensation for the company's employees, as well as the multiple of the CEO compensation to the average employee compensation. For example, the tool provides the following information for several of the largest of the 500 corporations.
1. Exxon Mobil Pre-tax Earnings: $73.3 Billion Actual Taxes Paid: $1.5 Billion (2%)
2. Chevron Pre-tax Earnings: $46.6 Billion Actual Taxes Paid: $1.9 Billion (4%)
3. Apple Pre-tax Earnings: $34.2 Billion Actual Taxes Paid $3.9 Billion (11%)
4. Microsoft Pre-tax Earnings: $28.1 Billion Actual Taxes Paid: $3.1 Billion (11%)
5. JPMorgan Chase & Co Pre-tax Earnings: $26.7 Billion Actual Taxes Paid $3.7 Billion (14%)