ecently, both President Obama and presumptive Republican presidential challenger Mitt Romney have said they wanted to lower the overall tax rate paid by corporations. Obama said he wants to lower the rate to 28 percent, while Romney said he wants to lower it to 25 percent. Really, it doesn’t matter what the corporate tax rate is because most corporations don’t pay that amount or anything close to it.
Last year, billionaire investor Warren Buffett shocked the world when he admitted that he paid less in taxes (as a percentage) than his cleaning lady. The fact that rich people pay almost nothing in taxes isn’t new information in the business world. It’s an accepted reality that most wealthy people pay very little in the way of taxes to the government.
What caught many people’s attention was the fact that someone as high profile as Buffett would admit this tax disparity and that he would detail the actual numbers of his finances in his call for the wealthy to pay more in taxes.
The same is true for corporations. Most billion-dollar corporations pay less in corporate taxes than their cleaning staffs pay in individual taxes (as a percentage). For proof-and an easy to read way to see it-personal finance website Nerdwallet.com compiled a list of some of the biggest American corporations and how much they paid in actual taxes (as a percentage) to the US government. The numbers may shock you.
Most corporations on the list pay between 0 and 15 percent in taxes, despite all making billions of dollars a year and qualifying for the 35 percent tax bracket. Their "taxes owed" versus "taxes paid" equation comes from taking into account companies' various deductions and deferments in a given year. Companies like IBM (1 percent of $21 billion), Exxon Mobil (2 percent of $73 billion) and Verizon (2 percent of $10.5 billion) even managed to pay a tax percentage in the single digits.
This is one reason finance professionals and tax experts have largely ignored the gripes about the US having the highest corporate tax rate in the world. It doesn’t matter what the corporate tax rate is if no one is actually paying it.