Frank: Here is the story that I had referred to earlier. It must be extremely distressing for you, the owner of a small business, to pay your fair share of income taxes and then read where these corporate giants have avoided paying their "fair share." What is your opinion of this story?
Study Finds That Many Large Companies
Pay No Taxes
By DAVID CAY JOHNSTON
Goodyear, Texaco,
Colgate-Palmolive, MCI WorldCom
and eight other large corporations earned
more than $12.2 billion in profits in 1996
through 1998, but none of them ended up
owing corporate income taxes over that
period, according to a study released
yesterday. Indeed, as a group, the companies
received $535 million in credits or refunds, the
report found.
The study of 250 large publicly traded
companies showed that 24 owed no tax or
received credits against past or future tax
obligations in 1998, up from 13 in 1997 and 16 in 1996. The study also
found that 71 of the 250 companies paid taxes at less than half the official
35 percent corporate rate during the three-year period.
The study was conducted by the Institute on Taxation and Economic
Policy, a Washington research organization associated with Citizens for
Tax Justice, a nonprofit group supported in part by labor unions. The
group argues that the tax system favors the rich and politically connected.
Corporate profits overall soared 23.5 percent during the three-year
period, but corporate tax revenues grew just 7.7 percent, a disjunction
that has drawn intense interest from the Treasury Department and some
members of Congress who are concerned about the growing market for
tax shelters and their abuse.
In recent years, Congress has watered down the 1986 overhaul of the
tax laws, which lowered rates and eliminated most tax shelters, and was
supposed to simplify reporting. The recent changes have opened fresh
opportunities for corporations to cut their taxes, the study found.
"Corporate taxes are not rising along with profits because companies
have found all sorts of ways to get around the reforms in the 1986 tax
act," said Robert S. McIntyre, the director of Citizens for Tax Justice.
"Companies also have gotten a lot of help from Congress, especially in
gutting the minimum tax rules."
Mr. McIntyre said that he and T. D. Coo Nguyen, the co-author, spent
more than two years examining financial statements the companies sent to
shareholders.
All but 18 of the companies studied are on the Fortune 500 list, and the
others are in the Fortune 1000. He said companies were excluded if they
lost money or their tax disclosures "were crafted so that you could not
figure them out."
At least two companies objected to the study's methodology.
Keith Price, a spokesman for Goodyear, said the study did not appear to
consider an accounting rule affecting its sale of a pipeline subsidiary in
1998. It made no objection to the 1996 and 1997 figures.
Michael N. Ambler, Texaco's chief tax counsel, said that his company
had tax disputes with the Internal Revenue Service that were unresolved
after more than a decade. If those disputes are settled with a refund, he
said, that can easily distort the figures for any one year. He said that even
the three-year study period was too short to give an accurate picture.
Timothy McCormally of the Tax Executives Institute, which represents
officials at large companies, told Bloomberg News that the companies
named in the report did nothing wrong. "There is nothing in the report that
suggests that any of this results from any illegal or improper activity," he
said.
The study by the Washington institute showed that the corporate tax
burden was falling in many cases because of the growing use of stock
options, which are an expense for tax purposes but do not count against
profits reported to shareholders.
Recent annual reports filed by Microsoft and Cisco Systems indicate
that they paid no federal income taxes in 1999 because stock options
exercised by employees wiped out profits for tax purposes.
The study found that General Electric, I.B.M., Pfizer, Intel and
Bristol-Myers Squibb also sharply reduced their tax rates because of
stock options without having to show reduced earnings to shareholders.
The most significant factor in the easing corporate tax burden, Mr.
McIntyre said, can be traced to actions in Congress, which relaxed the
corporate minimum tax in 1993 when the Democrats were in control of
both the House and Senate, and again in 1997, after the Republicans had
taken over. Congress made it easier for corporations to spread tax
breaks and profits over many years, including reaching back to past
years to get tax breaks that could not be used at the time.
In at least one of the three years studied, 41 of the 250 large companies
studied paid no federal income tax. Those 41 companies reported $25.8
billion in profits to shareholders in the years they paid no taxes. If they
had been obligated to pay the full 35 percent corporate rate, the tax bill
would have been $9 billion, but the companies received $3.2 billion in
refunds.
In total dollars, General Electric was the biggest beneficiary of tax
breaks, the study said, saving $6.9 billion in three years. The company
paid $2.1 billion in income taxes on $25.8 billion in profits, for a tax rate
of 8.1 percent.
The highest tax rate for the three years was paid by Winn-Dixie Stores,
which paid an average of 35.7 percent of its 1996 through 1998 profits
in federal income taxes. It was one of two companies that paid more than
the 35 percent statutory rate because of multiyear tax rules. The other
was Paccar. |
