The Tax Foundation has put out a news release noting some errors related to understanding corporate income tax in an Associated Press story.
The Tax Foundation states, “An AP article today on the GAO’s new report on corporate tax liabilities contains a serious error that undermines the story’s thesis.
“The AP reported that, according to the GAO study comparing tax liabilities of corporations from 1998-2005, ‘about 25 percent of the U.S. corporations not paying corporate taxes [in 2005] were considered large corporations, meaning they had at least $250 million in assets or $50 million in receipts.’ Furthermore, this claim was repeated in numerous stories.
“After careful review of the AP’s story, Tax Foundation economist Josh Barro found that the AP significantly overstated the number of large corporations not paying corporate taxes.
“‘The actual report reflects that, of the 1.26 million U.S. corporations with no 2005 tax liability, just 3,565 were large,’ says Barro. ‘That’s 0.28%, which is 90 times less than the figure reported by the AP. Policymakers and the public should not be deceived by this story that misrepresents the GAO report.’
“While the AP story quoted Sen. Byron Dorgan (D-ND) citing this report in claiming that ‘it’s time for big corporations to pay their fair share,’ Barro explains that, according to the GAO report, 75% of large corporations did pay corporate income tax in 2005. Furthermore, in the vast majority (85%) of cases where they did not, it was because they had zero or negative net income for 2005. For instance, American Airlines and General Motors avoided income tax for 2005 by losing $862 million and $10.5 billion, respectively, in 2005.
“‘These facts significantly undercut the thrust of the AP’s story, which is that significant numbers of corporations, especially large ones, are avoiding tax liability,’ Barro stated. ‘In fact, the GAO report shows that large, profitable corporations are paying taxes on their profits.'”
Read the AP story here.
