Battle Over Lower Tax Rates Takes a Sudden, Unexpected Turn
According to the Congressional Budget Office, U.S. corporations paid 12.1 percent of their profits in income taxes during 2011, making the ETR about one-third of the top marginal rate and far lower than the percentage paid in other parts of the world. ETRs vary by industry since there are thousands of different loopholes negotiated by lobbyists that protect specific industries. Pharmaceutical and biotech companies pay some of the lowest ETRs in the world. This reality has gotten people thinking.
Now that income tax reform is becoming a very serious issue and some significant changes may actually take place, many tax reform advocates are now thinking twice about supporting a leaner, fairer tax system. Dropping the top marginal tax rate to 25 percent from 35 percent while at the same time eliminating loopholes would actually cause the ETR for U.S. companies to double!
This doesn’t just impact big companies; businesses of any size that are taxed as separate entities from their owners, like C-corporations, will be directly impacted by any tax reform efforts. While the idea of a a simpler tax code is appealing, paying less in income taxes is more appealing.Finance Watch articles.