AEI economist Kevin Hassett writes an indispensable column for Bloomberg News. His latest offering is particularly valuable, debunking the silly notion reported in the N&O and hundreds of other newspapers last week that most U.S. corporations are somehow evading their income-tax liabilities:
While it is true that 60 percent to 70 percent of
companies in the study paid no tax in a given year, there was a
big qualification. The study focused on an Internal Revenue
Service tax database that included millions and millions of
companies. The vast majority of firms in the study were tiny mom-
and-pop enterprises.Why did the tiny mom-and-pop enterprises pay no taxes?
Because they didn’t make any money! The study reported that was
the reason about 80 percent of the firms in the sample avoided
taxes in a given year. How terrible of them.If the GAO issued a report that added together data for nine
hot dog stands and General Electric Co., and found that 90
percent of companies didn’t pay any tax, it would be a harmless
and silly thing to do. But if the Democrats then rush to the
microphones and insinuate to the general public that 90 percent
of companies are tax dodgers, the stakes change.[Snip]
For big corporations, the story is different, and utterly
inconsistent with the Democratic screed. The study found that
about 75 percent of large companies (those with sales above $50
million) paid taxes in 2005, about typical for recent U.S.
history. And those that didn’t pay taxes in 2005 did so earlier,
so almost no companies went through the sample period without
paying taxes. The latter is, again, typical.
