Abuses Aside, Corporations Are Paying Their Tax Bills.

• Author: Livingston, Phil
• Position: Brief Article

The Department of the Treasury's campaign against corporate "tax shelters is attempting to convict corporate America of massive tax abuse. But the politicians and media commentators have their facts lined up at the wrong angle -- companies are paying their way.

Corporate gross income tax collections in fiscal 1999 increased by $3 billion. It was only due to a $7-billion increase in refunds of taxes (presumably from prior years' returns) that net collections declined in the same period. In today's healthy economy, when corporations are profitable and reporting growing earnings, more are able to utilize pent-up tax credits (such as AMT tax credits). Corporations shouldn't be hounded for taking appropriate and legitimately earned tax credits.

Many inside the Beltway wield maligned statistics and anecdotal evidence to conclude there's at least a $ 10-billion annual revenue loss due to tax-avoidance schemes. Treasury puts the blame on declining corporate tax receipts squarely on abusive practices, without quantifying to what extent. Last November, Jonathan Talisman, Treasury's acting assistant secretary for tax policy, admitted before the House Ways and Means Committee, "It is unclear how much of the divergence between [corporate] tax and book income reflects tax shelter activity." What's needed at this point is a rigorous analysis of variances between recent corporate book earnings and tax receipts, data only Treasury can provide.

Doing something about corporate tax shelters has a certain rhetorical appeal, but an analysis of actual data shows no evidence of a loss of corporate tax revenues attributable to shelter activities. Since 1992, corporate federal income tax payments have grown by more than 80 percent, from $100.3 billion in fiscal 1992 to $184.7 billion in fiscal 1999. By point of comparison, GDP has grown...