Companies slide $181B through tax loopholes

While most Americans are paying more, corporations are benefiting as never before from provisions that tilt steeply in their favor.

By Aimee Picchi Apr 17, 2013 12:04PM

Image: Businessmen at lunch (© Digital Vision/Getty Images)While many Americans are shelling out more to Uncle Sam with the payroll tax hike, one group is still benefiting from loopholes: U.S. corporations. 

The estimated corporate tax revenue lost because of breaks from deductions, credits and other provisions amounted to more than $181 billion in 2011, according to a study from the U.S. Government Accountability Office

The number of tax breaks companies use has increased since 1986, while the revenue loss has jumped over the past few decades, the study noted. Even as recently as 2010, that figure was just $116 billion, Reuters notes. After that, Congress extended corporate tax write-offs. 

Some lawmakers are calling for reforms on how corporations can sidestep taxes, but reform efforts are far from straightforward, as my colleague Jon Berr recently reported

"Today, many Americans are paying their federal income taxes to contribute their fair share to the cost of our national security and of vital public services, but much of corporate America is still not doing the same," said Representative Lloyd Doggett, a Texas Democrat who requested the report, in a statement

Doggett has introduced three bills that would close loopholes such as those allowing companies to use tax havens to shift profits offshore and out of the reach of tax collectors. 

While it's unlikely his proposals will succeed in the Republican-controlled House, the GAO study could spur debate about tax reform for corporations. Deferral of income from "controlled foreign corporations" resulted in losses of $41.4 billion, the study found.

Companies including General Electric (GE) have come under fire for avoiding Uncle Sam, as my colleague Kim Peterson reported. Among 83 companies using the strategy, GE was the biggest benefactor of the overseas profit-shifting tactic, according to a Bloomberg report published last month. Others that profited include multinationals such as Pfizer (PFE), Merck & Co. (MRK) and Johnson & Johnson (JNJ). 

But business supporters such as the U.S. Chamber of Commerce asked that some breaks be preserved, Reuters notes. One of those is the accelerated depreciation of machinery and equipment, which was the biggest corporate tax break in 2011, leading to an estimated tax loss of $76 billion. 

Changes to the tax provisions could also affect individual filers. The GAO report notes that about two-thirds of the tax breaks are also used by individuals. 

"Over a three-year period, 30 Fortune 500 companies spent more on lobbying Congress than they paid in taxes to the Treasury," Doggett said in the statement. "Some of our largest corporations have enjoyed effective rates that are single digits. Corporate America did not contribute a nickel to the fiscal cliff deal that meant higher taxes for many Americans at the beginning of this year."

Follow Aimee Picchi on Twitter at @aimeepicchi.

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Apr 17, 2013 1:07PM
The sad thing is that only large multinational corporations can take advantage of these loopholes. Once again small business are forced to pay while large corporations like Apple, Microsoft, Walmart. and GE can use subsidiaries, transfer pricing, and special purpose entities to avoid paying US taxes. Politicians will promise to make reform but since these large corporations fund their elections it is doubtful that anything will change.
Apr 17, 2013 2:17PM
The SCOTUS ruled that corporations are people so they can give as much money to politicians as they want ? So why are they not taxed like people ....... like me and you ...? Just a thought !!! So much for free speech..<< I mean that is what i would do when the ruling came down.. Yo IRS did you idiots get that ? The Supreme court said they are people ... Tax them like people ..So much for the best congress money can buy...They are lucky i do not run the IRS because that is what i would do instantly... The court said they are people ...I would throw it right in the SCOTUS face... 9 useless POS...
Apr 17, 2013 5:01PM
This is no shocker as most politicians sit on corporate boards, are bank rolled by large corporations, or become corporate lobbyists after they leave politics.
Apr 17, 2013 1:16PM
With 73,000 pages of tax loopholes, what do you expect?

Stop using the tax code to reward and punish behavior.  Strip everything completely out.   Then if you want to reward some behavior, pass a SEPARATE bill with a automatic 3 year renewal required.

This is how hypocrites like Obama pay 18.4% when they are in the 39.6% bracket.  
Apr 17, 2013 12:38PM

So they get to use the loopholes to hoard cash.  Let's see here, If these loopholes were closed and they had to pay the full amount of tax due, they would probably hire more workers for the more legitimate deductions, right?  Is there something I am missing with this?

Apr 17, 2013 1:17PM


Apr 17, 2013 2:00PM
Even if they add another few hundred pages to the tax code and collect all these taxes, we're still running $800 billion deficits as far as the eye can see.

It's a spending problem, stupid.

Apr 18, 2013 11:27AM

So many comments...That make so little sense....And then "attacks" on the Author..


What the hell is a matter with some of you people..??

Do you really think your comments justify reading...??

Attacks on the author, and not the Government's tax nightmares, along with what appears to be fanagling of large Corporations...To screw us...YES US, we are still the Government of the People, by the People....You should direct your hatred, where needs be; Actually hatred accomplishes little.

Because, it is a blinded emotion of radicals, instead of thoughts of sensible beings..

And you make references to a thumbs up or down, very juvenile; What are you 12 years old.???

Apr 18, 2013 9:45PM

I'm not sure why, but I feel compelled to try.  I saw the headline and thought that's a lot of money.  Then I read the article and find that $76 billion of the "lost" revenue is from something called accelerated depreciation.  So, here's what you need to understand.  Accelerated depreciation does not allow corporations (or your local pizza parlor whose owner can take advantage of the same "loophole" as the big corporations) to get out of paying allows them to postpone paying the taxes. 


Say, your local pizza parlor buys a new pizza oven for $10,000.  Ordinary depreciation would allow the owner to deduct $2,000 of the cost for five years (assuming a combined fed and state tax rate of 35% that would reduce his taxes $700 each year for a total reduction of $3,500).  Accelerated depreciation allows the owner to deduct the SAME amount (the $10,000 cost of the oven) faster (say, $4,000, $2,500, $1,500, $1,200 and $800 over the SAME five year period) and that results in the SAME tax reduction of $3,500.  There is also a provision (Section 179) available to little guys and big guys that allows them to take the full $10,000 off in the year of the purchase and NONE in the next four years, but the amount that can be deducted in that manner is limited.  Even if that election is made, the total tax savings is the SAME $3,500.  Neither the pizza guy or the corporation is getting out of paying taxes due to accelerated depreciation.  They are getting to reduce their taxes for a couple of years, but the government "gets even" in the remaining years of the oven's useful life.  The money the government "loses", it will get back in the next few years.


I know many of you think even the $10,000 cost of the oven necessary to run his business should not be deductible to your greedy local pizza guy, let alone big, nasty corporations.  Everyone should be required to start and run a small business for a couple of years so they can truly understand how things really work.


This should be good.



Apr 18, 2013 2:24PM
Obama paid 18% in taxes, do you think they are going to change this?
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