One-Fifth of Profitable Large Corporations Escape Taxes

What's Hot

The Most Sinful City in the U.S. Is … (Hint: It’s Not Vegas)Family

How a Mexican Tariff Will Boost the Cost of 6 Common PurchasesFamily

This Free Software Brings Old Laptops Back to LifeMore

How to Protect Yourself From the ‘Can You Hear Me?’ Phone ScamFamily

Report: Walmart to Begin Selling CarsCars

Where to Sell Your Stuff for Top DollarAround The House

Is Your TV Tracking You? Here’s How to Tell — and Prevent ItAround The House

11 Staging Tips to Help You Get Top Dollar When Selling Your HomeAround The House

8 Tuition-Free U.S. CollegesCollege

4 Car Insurers That Might Raise Rates Even When the Accident Wasn’t Your FaultCars

21 Restaurants Offering Free Food Right NowSaving Money

20 Simple Hacks to Make Your Stuff Last LongerAround The House

Trump Scraps FHA Rate Cut — What Does It Mean for You?Borrow

How to Invest If Trump Kills the ‘Fiduciary Rule’Grow

12 Surprising Ways to Wreck Your Credit ScoreBorrow

10 Overlooked Expenses That Ruin Your BudgetFamily

Learn the two key reasons profitable corporations often leave Uncle Sam empty-handed.

As the filing deadline for taxes nears, we have yet another reminder that some corporations manage to pay no federal income taxes.

That was the case for about one-fifth of large American corporations that reported a profit in 2012, the latest year for which data is available.

That statistic comes from a new analysis that was publicly released Wednesday by the U.S. Government Accountability Office, or GAO, an independent agency that works for Congress. The analysis was requested by Vermont Sen. Bernie Sanders, in his role as the ranking member of the Senate Banking Committee. Sanders is also currently a Democratic candidate for U.S. president.

Specifically, the GAO was asked to assess the extent to which U.S. corporations pay U.S. federal income taxes and the percentage that have had no federal income tax liability.

To do that, the GAO reviewed economic literature and analyzed Internal Revenue Service data for the tax years 2006 to 2012. The GAO also interviewed IRS officials and experts on the topic.

The findings of the analysis include:

  • In each tax year from 2006 to 2012, at least two-thirds of all active corporations had no federal income tax liability. Larger corporations were more likely to owe taxes.
  • Among large corporations (generally, those with at least $10 million in assets), 42.3 percent paid no federal income tax in 2012.
  • Among those large corporations that reported earning a profit that year, 19.5 percent paid no federal income tax in 2012.
  • Corporations that did have a federal corporate income tax liability for 2012 owed $267.5 billion.
  • For 2008 to 2012, profitable large corporations paid, on average, federal income taxes amounting to about 14 percent of their pre-tax net income, which is referred to as an effective tax rate. (The statutory tax rate on net corporate income ranges from 15 to 35 percent, depending on the amount of income earned.)
  • From 2008 to 2012, all large corporations — meaning those that reported a profit or a loss during those years — paid federal income taxes amounting to 25.9 percent of their pre-tax net income.

The GAO notes that reasons why even profitable corporations might avoid paying federal income taxes include:

  • Tax deductions for losses carried forward from prior years.
  • Tax incentives like depreciation allowances.

Sanders commented in a statement released the same day as the GAO’s analysis:

“There is something profoundly wrong in America when one out of five profitable corporations pay nothing in federal income taxes. Large corporations cannot continue to get more tax breaks when children in America go hungry. We need real tax reform to ensure that the most profitable corporations in America pay their fair share in taxes.”

What’s your take on corporate income taxes? Share your thoughts below or on Facebook.

Stacy Johnson

It's not the usual blah, blah, blah

I know... every site you visit wants you to subscribe to their newsletter. But our news and advice is actually worth reading! For 25 years, I've been making people richer without making their eyes glaze over. You'll be glad you did. I guarantee it!


Read Next: 7 Steps to Turn Your Ideas and Inventions Into Money

Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 1,893 more deals!