Tuesday, February 8, 2011
Corporate Taxes
This article deals with corporate taxes, and explains that though the United States has one of the highest corporate tax rates, companies rarely pay that amount. With such a high rate (35%), companies have the incentive to devote mass amounts of time to finding loopholes. The government raises less revenue with this inefficient system. Of course, some companies aren't as ingenious as General Electric and do in fact pay the stated rate, or close to it. Either way, decisions by companies are almost always made with the tax consequences in mind. For instance, airlines buy more planes than they actually need. When companies do things they would not normally do, it slows economic growth.
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2 comments:
The high rate of 35% seems to be detrimental to the U.S. economy as it is actually accomplishing the opposite of its intended objective. With such a high rate, I would think that any company would look for loopholes in order to avoid paying such great amounts. Although the search and process of qualifying for loopholes costs money, it can be much less than the 35% corporate tax rate which would appear to be the more beneficial solution as these corporations are profit driven with the primary incentive of maximizing shareholder value. So, if the tax rate was lower then maybe this would be a more efficient way for the government to incentivize these corporations to stop using the loophole strategy and avoiding taxes.
Fixing the loophole system will involve a whole revamping of our tax system (a lot of work and resources and money used) so states and the federal government just raise the tax rate (like Illinois -posted in my earlier article)
Also, this is interesting to know because i remember many people whining about the increased tax rates in Illinois.
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