Following the revelation last week that Apple Computer paid virtually no taxes at all on billions of dollars in overseas profits, the topic of what corporations actually pay in taxes is a timely one which David Leonhardt explores in a The New York Times Economix Blog post, Untangling What Companies Pay in Taxes.
It’s a revealing blog post. Despite the U.S. official federal corporate tax rate of 35 percent — which companies decry as bordering on extortion — most companies pay far less. Of course, they have all sorts of ways of dressing up what they actually pay in their filings with the SEC and their press releases, so discerning the actual numbers isn’t all that easy.
Still, Leonhardt perseveres, and comes to these interesting conclusions:
- The most revealing number in corporate tax filings is “Cash Taxes Paid,” which includes the total in corporate taxes that a corporation pays to the U.S. government, foreign governments and state and local governments.
- In research into these numbers during the past six years, S&P Capital IQ, a financial research firm, concluded that the average tax rate for companies in the S&P 500 was 29.1 percent, which is much less than the stated federal rate for corporate taxes, not to mention foreign, state and local taxes.
- Companies in different industries pay different tax rates — oil companies and retailers, for example, pay relatively high tax rates while technology and pharmaceutical companies pay lower rates.
What all this shows is that the U.S. is by no means a high tax jurisdiction, despite the wails of corporate executives nationwide. And if Congress goes ahead and passes legislation allowing U.S. companies to repatriate foreign profits with no or a very low tax rate, the amount of tax actually paid will drop even farther.