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Beyond the Headlines: What Corporations Really Pay in Income Taxes. Presentation by Scott Hodge & Will McBride 202-464-6200 www.TaxFoundation.org. 1. U.S. Continues to Fall Behind by Standing Still. But Nobody Pays That U.S . Business Has High Tax Rates but Pays Less --New York Times.

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beyond the headlines what corporations really pay in income taxes

Beyond the Headlines: What Corporations Really Pay in Income Taxes

Presentation by

Scott Hodge & Will McBride

202-464-6200

www.TaxFoundation.org

1

slide13

But Nobody Pays That

U.S. Business Has High Tax Rates but Pays Less--New York Times

two new tax foundation reports on corporate effective tax rates
Two New Tax Foundation Reports on Corporate Effective Tax Rates

“Beyond the Headlines: What Do Corporations Pay in Income Tax?” – William McBride

  • IRS data shows that largest U.S. companies pay 68% of all corporate income taxes.
  • IRS data shows that corporate ETR has averaged 26% since 1994.
  • Including foreign income taxes, total ETR is close to statutory rate of 35%.

“U.S. Corporations Suffer High Effective Tax Rates by International Standards” – Phillip Dittmer

  • Survey of 13 most recent studies finds that ETR in the U.S. is high globally by any measure.
1 900 largest companies pay 68 of all corporate income taxes
1,900 Largest Companies pay 68% of All Corporate Income Taxes

Source: IRS;

Doesn’t add up to 100% due to losses

including foreign taxes and foreign income
Including Foreign Taxes and Foreign Income

Foreign tax credit is a credit for almost all foreign income taxes paid.

Foreign tax credit in 2008 ≈ $100 billion.

Including foreign taxes paid, as well as foreign income (both deferred and non-deferred) the overall effective tax rate on the worldwide income of U.S. corporations is about 33%.

Very close to the statutory rate of 35%.

contribution of various credits in reducing effective tax rate for a sample of industries 2008
Contribution of Various Credits in Reducing Effective Tax Rate for a Sample of Industries, 2008
how does the u s compare internationally
How does the U.S. Compare Internationally?
  • New Tax Foundation Study surveys 13 recent academic studies on effective tax rates, finds that:
    • U.S. consistently ranks among the top five highest effective tax rates on multiple measures.
    • Only nation with a higher effective tax rate in each study is Japan.
three methodologies one answer u s effective rate is nearly the highest in the world
Three Methodologies, One Answer: U.S. Effective Rate is Nearly the Highest in the World
  • Sample of financial reports (4 studies)
    • ETR = 27% in the U.S. versus 19.9% elsewhere.
  • Hypothetical firm (5 studies)
    • EATR = 29.8% in the U.S. versus 22.3% elsewhere.
    • Average tax cost for start to finish profitable investment over its life.
  • Hypothetical firm (4 studies)
    • EMTR = 26.3% in the U.S. versus 18.2% elsewhere.
    • Tax cost on the final dollar of a break even investment over its life.
bottom line
Bottom Line
  • U.S. federal corporate effective tax rate (ETR) is about 26%.
  • Overall ETR on worldwide income of U.S. corporations is 33%, inclusive of foreign taxes paid on foreign income.
  • Does not vary much across industry or company size, when foreign taxes are accounted for.
  • All recent studies find the U.S. corporate ETR is nearly the highest in the world.
for more information contact

For More Information Contact:

Scott Hodge or Will McBride

202-464-6200

www.TaxFoundation.org

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