Charts of the day, corporate income-tax edition
This is a chart of corporate income tax as a percentage of total corporate profits, and it’s the main thing you should bear in mind when people start saying that the US corporate income tax is too high. And while you’re at it, you should remember this chart, too, showing corporate income tax as a percentage of GDP.
Once upon a time, the corporate income tax generated a significant share of tax revenues; now, it’s bumping along in the 2%-of-GDP range. Yes, the marginal rate of corporate income tax is high, at 35%. But US companies are extremely good at not paying that.
But at least we know the aggregate amount that corporations pay in taxes. What we don’t know — because they won’t say, and no one’s forcing them to say — is how much any given public company pays.
Allan Sloan has a very good column on this today. Companies already report 16 different tax metrics; they should simply be required to add a 17th — the amount they pay the IRS in taxes — which in many ways is most important. The companies already file tax returns; the number’s right there, on lines 31 and 32. They just refuse to say what it is.
During the past few months I’ve repeatedly asked three big companies in the tax-wars cross hairs — GE, Verizon, and Exxon Mobil — to voluntarily disclose information that would refute allegations that they incurred no U.S. federal income tax for 2010. All have refused, saying they won’t disclose anything not legally required. They still manage to complain about the allegations, however. I suspect that if I called the rest of the Fortune 500, I’d get 497 similar responses.
As a society, we need the “taxes incurred” information to inform our current tax debate. Investors, too, would benefit; knowing the tax that companies actually incur would be a useful analytical tool.
Once the taxes-paid number was public, we could start dividing it into the company’s GAAP profits, to get an idea of what kind of tax rate companies are really paying right now. And of course, companies would be more than welcome, if they were so inclined, to reveal how much tax they were paying in other jurisdictions as well. But for the time being, all we can do is look at the aggregate numbers. Which are showing, very clearly, that corporate income taxes in America are very low and falling.
Update: Kevin Drum creates the chart I should have led with: corporate taxes as a percentage of pretax profit.