A new study by the
Tax Foundation, a nonpartisan tax research group based in Washington, D.C.,
reports that much of the partisan rhetoric accusing corporations of abusing the
tax code by profiting from "corporate tax loopholes" is both
unjustified and inaccurate.
The study looks at
three questions: What are the different types of corporate tax expenditures,
and how much do they cost the federal government? How much do corporate tax
breaks compare to tax breaks for individuals? How much do tax breaks reduce the
amount of tax that corporations pay?
Of the federal tax
breaks available to corporate taxpayers, only 20 percent were specifically
targeted at one industry or sector, the report found, while more than half of
the tax expenditures were used to support a broad array of industries.
The Tax Foundation
advised that if the federal government considers reducing the number of
corporate tax expenditures, federal policymakers also should reform the entire
corporate tax code. Of the countries in the industrialized world, the United
States has the highest corporate taxes, and the study found that "that
rate – not tax breaks – is threatening American competitiveness, wages, and
jobs."
The report said the
tax base should be broadened and the overall rate should be reduced. However, "closing
loopholes" to generate more government revenues "seems punitive,
arbitrary and politically motivated," the report said. "Lowering the
corporate rate should be a top priority for lawmakers and broadening the base
by closing some tax expenditures should be part of that discussion," the
study said.
The report
concluded: "Contrary to political rhetoric and public perception, the tax 'loopholes'
available to U.S. companies are not as generous or as costly as is often
repeated. Indeed, the budgetary costs of the popular tax preferences available
to individuals – such as the mortgage interest deduction, exclusion for employer-paid
health insurance, and the exclusions for pensions and 401(k)s
– are all larger than the $102 billion in budgetary costs of corporate tax
expenditures."
Cal-TaxReports, August 9, 2010
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