NCPA - National Center for Policy Analysis

Corporate Taxpayers aren't Scofflaws

April 14, 2004

Senator Byron Dorgan, Democrat of North Dakota, has become the point man for liberals looking to make hay on tax day. Back in 1993, he had the U.S. General Accounting Offic look at taxes paid by U.S.-based and foreign-based corporations. The report found a significant percentage of foreign controlled corporations as well as domestic corporations paid no federal income taxes in the United States.

This year's report was completed February 27. Rather than release it then, when few would be paying attention, Sen. Dorgan got the GAO to release it on April 2, in the middle of tax season, says Bruce Bartlett.

With the data showing almost three-fourths of foreign corporations and two-thirds of U.S. corporations had no tax liability in 2000, many individuals with large tax liabilities no doubt felt some anger and resentment. Unfortunately, the GAO report provides little context for its findings. According to Bartlett:

  • It would be nice to know that some 45 percent of all corporations had no net income and nearly 60 percent had assets of less than $100,000 in 2000, according to the Internal Revenue Service.
  • It is hardly surprising that a company pays no taxes when it has no income and virtually no assets, after all, about 40 percent of individual income tax returns report no tax liability, according to the Joint Committee on Taxation.
  • Another point worth mentioning is that all of this alleged tax avoidance came during the Clinton Administration, yet because the data have been released now, many casual readers are probably left thinking that the Bush Administration is responsible.

In the battle of the press releases, Sen. Dorgan probably won this year. By the time analysts are able to explain why his data is misleading, tax season will be over.

Source: Bruce Bartlett is a senior fellow with the National Center for Policy Analysis, April 14, 2004.


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