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Politics : PRESIDENT GEORGE W. BUSH -- Ignore unavailable to you. Want to Upgrade?

To: gao seng who wrote (50112)	10/20/2000 10:14:43 PM
From: ksuave	Read Replies (1) \| Respond to of 769667

The worst welfare of all: Corporate Welfare. Friday October 20, 6:11 pm Eastern Time Study finds many large U.S. companies paid no taxes (UPDATE: Adds details, comment from General Motors in paragraphs 3, 11-13, 14) By Kristin Roberts NEW YORK, Oct 20 (Reuters) - Some of the largest U.S. companies paid no income tax between 1996 and 1998 despite earning billions of dollars during those years, according to a recent study. Drugs giant Pfizer Inc. (NYSE:PFE - news), banking group J.P. Morgan & Co. (NYSE:JPM - news) and automaker General Motors Corp. (NYSE:GM - news) were among the 41 companies that not only paid zero tax but received $3.2 billion in rebate checks, the study found. The study, released this week, was done by the Institute on Taxation and Economic Policy, a nonprofit organisation based in Washington. The institute is associated with the Citizens for Tax Justice, another nonprofit organisation that supports tax reform and says the U.S. tax system favours the wealthy. ``With significant help from Congress, corporations appear to be finding ways around the tax reforms adopted in 1986,'' said Robert S. McIntyre, a principal author of the study, in reference to an overhaul of the U.S. tax system 14 years ago meant to close many loopholes. The study analysed 250 companies, their profits and the amount of taxes paid during the years of 1996, 1997 and 1998 -- a period when U.S. corporate profits grew more than 23 percent, according to government statistics. Under the federal tax code, corporations pay 35 percent of their profits in income tax. The average tax rate, or the ratio of taxes to profits, is often much lower due to tax credits and write-offs allowed under law. The average tax rate in 1996, for example, was 25.8 percent, according to data from the Treasury Department's Office of Taxation. The study found that the 41 companies reported $25.8 billion in pretax U.S. profits. With a 35 percent tax rate, they would have paid some $9 billion in taxes. Instead, they received rebates, the group said. More than half of the companies, or 133, of those studied paid less than half the statutory tax rate in at least one of the three years, the institute said. Some of the companies named in the group's report took issue with the study's methodology. But industry and policy analysts on Wall Street noted that companies often pay lower tax bills thanks to allowances that have been under federal law for ages. General Motors said did not take into account the taxes corporations paid years ago that put them in a credit position during the period of the study. ``You're in a credit position not because somebody's giving you something but because you've already paid,'' said Mark Tanner, spokesman at GM. ``The key point to make about GM is that we pay taxes,'' Tanner said, noting GM paid $2.4 billion in taxes in 1999. ``We have a positive account balance with the IRS, which consists of tax prepayments that were paid in prior years as well as tax credit carryforwards.'' Indeed, industry and policy analysts on Wall Street noted that companies often pay lower tax bills thanks to allowances that have been under federal law for ages that include credits for things such as research and development. One example is a long-standing provision in the tax code allowing companies to deduct gains from employee stock options. A corporation will, for instance, issue employees options that vest over three years. After that period, the employee can exercise those options at the previously agreed price. The difference between the price actually paid and the price of that stock on the market is recorded as compensation by the corporation. ``That's a major compensation deduction for companies without the cash outflow. That will certainly lower your tax base,'' said Kevin Johnson, partner at accounting firm Silverman Linden Higgins LLP. Of the 250 companies studied, the institute said it found 233 of them had received stock-option benefits over the 1996-1998 period, lowering their taxes by $25.8 billion.