Corporate taxes need an overhaul

One reason corporations justify dodging U.S. taxes by becoming, on paper, foreign companies is that the U.S. corporate tax rate is too high. And, again on paper, that would appear to be true. The U.S. corporate tax rate of 35 percent is double or triple the corporate tax in countries that American firms move to for tax purposes.

But a new report from the General Accountability Office requested by Democratic presidential candidate Sen. Bernie Sanders tells a different story. Rather than being burdened by the world’s highest tax rate, 19 percent of profitable corporations with assets over $10 million paid no corporate tax in 2012. And those that did pay, paid an average of 14 percent between 2008 and 2012.

“There is something profoundly wrong in America when one out of five profitable corporations pay nothing in federal income taxes,” Sanders said.

Corporations reduce their tax liability through credits, loopholes, deductions and stashing profits overseas. Some get away without paying their “fair share,” or, too often, any share.

President Obama has used his executive power to make it more difficult for corporate “inversions” in which large U.S. companies buy smaller foreign companies to change their national identity – and tax liability – without actually changing their U.S. operations.

The president is right to get tough with these blatant tax dodges, but a lasting solution will require an overhaul of corporate tax laws. The next Congress – unlike this do-nothing one – should get serious about fixing the unfairness on both sides of corporate taxation.

This story was originally published April 14, 2016 at 6:55 PM with the headline "Corporate taxes need an overhaul."