With the dreaded April 15 tax deadline looming, what do our government auditors tell us?
More than six of 10 American companies paid no income tax between 1996 and 2000, when our economy was booming. A similar percentage of foreign corporations operating in the United States paid zip during that five-year span. So says a study done by the General Accounting Office, the investigative arm of Congress.
Those GAO guys. Masters of timing.
If we didn't want corporations to pay their fair share, the federal corporate-tax rate for big corporations would not be a hefty 35 percent.
So what's wrong with this picture?
If you have a job, you're more than likely paying a generous portion of that income to Uncle Sam. Yet a majority of U.S. corporations did not pay a penny in taxes during some corporate boom times.
The country's federal deficit is soaring, endangering an economic recovery thin on new jobs. Yet most U.S. corporations - guided by the blossoming industry of high-priced tax advisers and law firms - are enjoying shelters, aggressive write-offs, offshore tax havens, credits and other devices to avoid or minimize paying income taxes.
Just remember: When corporations do not pay what they should, others end up on the hook to make up the loss. That means you, individual taxpayers. And future generations who must pay off a large federal deficit.
White House budget forecasts say corporations will pay $168.7-billion in income taxes in 2004, compared with $765.4-billion paid by individuals.
Think of it this way. Individuals will pay $4.50 in taxes for every $1 paid by those corporations that happen to pay any taxes at all.
The GAO study also says that in 2000 an estimated 94 percent of American corporations paid less than 5 percent of their total incomes in taxes.
Corporations have perfected more than avoiding federal income taxes.
In investigative reports, St. Petersburg Times reporter Sydney P. Freedberg discovered that 98 percent of the estimated 1.5-million businesses in Florida paid nothing in 2002 in Florida corporate income tax. Among the heavyweights avoiding Florida taxes: Carnival Corp., Verizon Communications and the Tampa Bay area's Saddlebrook Resorts.
Hey, I'm all for smart tax management. Nobody should be paying more than he or she really owes.
But when 60 percent of U.S. corporations paid nothing during a time of big corporate profits, and when almost every business in Florida paid no state corporate income tax, something's not right.
Here's one reason. Three little words: abusive tax shelters.
If America was looking for a new growth industry, the business of advising corporations and wealthy individuals how to avoid paying taxes must rank near the top.
Is it any wonder that the number of taxpayers who believed it was okay to cheat a little rose 50 percent over the last four years? In 1999, 8 percent of taxpayers said it was okay to cheat a little. That figure rose to 12 percent in an Internal Revenue Service survey last summer.
If only the little guy had the same access to the creative tax shelters and tax-avoidance schemes promoted by major accounting firms, law firms and investment banks that cater to corporate and rich clients.
Funny, I used to think these were the guys who counseled clients on how to stay within the financial laws. That was before Enron. And before these advisory firms realized how profitable it is to peddle tax shelters.
Experts say the IRS fails to collect between $250-billion and $400-billion in owed taxes every year.
Former IRS commissioner Charles Rossotti last year said the agency failed to pursue up to 60 percent of tax debts, 75 percent of taxpayers who failed to file a tax return and 79 percent of those who use questionable tax shelters.
Two month ago, Rossotti told the PBS public affairs show Frontline that because the IRS has inadequate resources to investigate tax-avoidance deals, he estimates people are paying 15 percent more than they should to help pay for it.
"You could double everybody's refund if you just collected all the taxes that are due," Rossotti said.
Remember that when you write your oversized IRS check, or await your underfed refund.
