Many U.S. corporations have not been paying federal income tax, with even large and profitable companies having little or no liability, according to the Government Accountability Office.
The watchdog said in a report that in each year from 2006 to 2012, at least two-thirds of active corporations had no federal income tax liability. The report was prepared for Democratic presidential candidate Bernie Sanders, who asked the GAO to look into corporate tax loopholes.
Among large corporations (generally those with at least $10 million in assets), less than half — 42.3% — paid no federal income tax in 2012, the GAO found, and 19% of the large companies that reported a profit still paid none.
On average, large profitable American corporations paid only 14% of their profits in federal income taxes from 2008 through 2012.
“There is something profoundly wrong in America when one out of five profitable corporations pay nothing in federal income taxes,” Sanders said in a statement. “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,” he added. “That means closing corporate tax loopholes to raise the revenue necessary to rebuild America and create millions of jobs.”
The GAO said the reasons why corporations may pay no taxes in a given year include the use of tax deductions for losses carried forward from prior years and tax incentives, such as depreciation allowances that are more generous in the federal tax code than those allowed for financial accounting purposes.
In each year from 2008 to 2012, about 15% to 19% of all active corporations had their positive net tax income completely offset by net operating loss deductions carried forward from prior tax years. “Corporate greed is destroying the fabric of America,” Sanders said. “It must come to an end.”
The senator from Vermont has co-sponsored a bill to prevent profitable corporations from receiving tax breaks by sheltering income in Panama, the Cayman Islands, Bermuda, and other offshore tax havens.