U.S. Corporations Haven’t Been Paying The Full Corporate Tax Rate For 45 Years

In 2011, U.S. corporations paid a 12.1 percent effective corporate income tax rate, a 40-year low. The statutory corporate tax rate is 35 percent, but companies drive their rates fare lower due to the proliferation of loopholes and deductions and the growing use of offshore tax havens.

This isn’t a new problem, as Goldman Sachs’ David Kostin shows. In fact, corporations have been paying below the statutory rate for 45 years (the chart uses 39 percent due to its inclusion of state corporate taxes):

For the last 45 years, the median S&P 500 firm has paid an effective tax rate averaging more than 5 percentage points below the statutory rate. Despite statutory rates hovering near 39% for the last 25 years, effective tax rates have been gradually decreasing (see Exhibit 2). At 30%, the current S&P 500 median effective tax rate is almost 10 percentage points below the statutory level, and close to the global statutory average.

The corporate income tax is so riddled with holes that 26 major corporations paid nothing between 2008 and 2011, while making a collective $205 billion in profits. Democratic Sen. Carl Levin (MI) this week released a plan to raise $200 billion over ten years by closing corporate tax loopholes. (HT: Sam Ro)