Corporate America Pays Higher Tax Abroad: Study

Nearly 40 percent of 288 Fortune 500 companies studied paid zero or less in U.S.income taxes in at least one year.

The Beltway view that a relatively high corporate income tax puts the United States at a competitive disadvantage is false, the authors of ' The Sorry State of Corporate Taxes,' a study released Tuesday, contend.

Many U.S.-based companies doing a lot of business abroad apparently pay a good deal more taxes overseas than they do here. Of 125 Fortune 500 corporations with foreign pretax profits of at least 10 percent of their total worldwide pretax profits from 2008 through 2012, two-thirds paid higher corporate tax rates to foreign governments where they operate (27.3 percent) than they paid in the U.S. on their U.S. profits (15.8 percent), according to the study by the Citizens for Tax Justice (CTJ) and The Institute on Taxation and Economic Policy (ITEP).

Further, the effective foreign tax rate on the 125 companies was 2.7 percentage points higher than their effective tax rate in the United States, according to the study, which looks at the profits and U.S. federal income taxes of the 288 Fortune 500 companies that have been consistently profitable in each of the five years between 2008 and 2012.

'Corporate lobbyists incessantly claim that our corporate tax rate is too high, and that it's not 'competitive' with the rest of the world,' Robert McIntyre, director of Citizens for Tax Justice and the report's lead author, said in a press release. On the contrary, he added: 'Most multinationals are paying lower tax rates here in the United States than they pay on their foreign operations.'

CTJ and ITEP, which both identify themselves as non-partisan research and advocacy groups, released the study a day before House Ways and Means Committee Chairman Dave Camp (R-MI) released sweeping draft legislation aimed at reforming the nation's federal tax system.

Among other reforms, the two groups are urging Congress to consider repealing a federal tax rule that enables U.S. corporations to defer their U.S. taxes on their offshore earnings. A repeal would mean that 'there would be no tax incentive to shift profits to offshore tax havens or jobs to lower-tax countries,' according to the study.

Similarly, in the press release announcing his bill, Camp says it would modernize the international tax system 'for the first time in more than 50 years while protecting jobs, wages and profits from being shipped overseas.'

Camp's major proposal, however, would cut the current corporate tax rate from 35 percent to 25 percent.

That wouldn't make much difference to many big, profitable, public U.S. companies, according to the study, which found the companies examined paid an effective federal income tax rate of 19.4 percent over the five-year period. About a third of the companies (93), paid an effective tax rate of less than ten percent.

Twenty-six companies, including Boeing, General Electric, Priceline.com and Verizon paid no federal income tax over the five-year period. Wells Fargo, AT&T, IBM, General Electric and Verizon received over $77 billion in tax breaks during that time.

Nearly 40 percent of the companies studied (111) paid zero or less in federal income taxes in at least one year.

The industry sectors with the lowest effective corporate tax rates were utilities (2.9 percent), industrial machinery (4.3 percent), telecommunications (9.8 percent), oil, gas and pipelines (14.4 percent), transportation (16.4 percent), aerospace and defense (16.7 percent) and financial (18.8 percent).

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