Is the US Corporate Tax System Fair?

The nominal tax rate for US corporations is the highest in the world and has stayed flat as our peer nations have dropped theirs.

nominal-tax-rates

(Tax Foundation article here)

Consider: have the other OECD nations, now averaging 25% (compared to to the US’ 40%), figured out something that the United States hasn’t?

Now: if we look at the effective tax rate--how much is really paid--the picture looks different.

effective-tax-rates

In every country, corporations pay on average less than their nominal rate due to various tax deductions and subsidies, but the US drops from #1 to #15 in the ranking.

Where is this big change coming from? Is it that most US companies are paying very little in income taxes, or that there is a variation?

Let’s consider:

The highest corporate tax payers among large corporations in 2014:

  • ConocoPhillips (52%)

  • Chevron (43%)

  • ExxonMobil (39%)

  • Goldman Sachs (33%)

  • WalMart (31%)

A bunch of profitable S&P500 corporations paid no income taxes at all during a quarter in 2014. The 5 biggest:

  • Merck

  • Seagate

  • Thermo Fisher

  • General Motors

  • Public Storage

Assuming all of these large corporations are trying to minimize their tax burden, what do you think causes some to be able to pay no taxes, where others pay over 30%? 

Does it seem reasonable that some companies pay a lot more in income taxes than others? 

Let us know in comments if you believe:

  1. Everyone should pay the same, and why

  2. Different companies should pay different amounts, and based on what principles

5 Comments

Erik Fogg

We do politics, but we don't do the thinking for you.