Corporate Tax Breaks?

The Associated Press reports today that more than two-thirds of corporations doing business in the U.S. (including foreign corporations) paid no federal corporate income tax between 1998 and 2005 (see AP story here). This, on combined sales (not necessarily profits) of more than $2.5 trillion. About 25% of the non-paying corporations are considered large, C corporations--with at least $250 million in assets and/or $50 million in receipts. If we're reading this correctly, these U.S. businesses alone, which are subject to a tax rate of 35% on income of more than $18.33 million (and potentially another 15% for excess or undistributed profits), have avoided billions in tax liability over the period.

In a recent Butt and ReButt comment, J.T. Twilley educated us about corporations "not really paying taxes," because they pass on those costs to consumers through higher prices. But according to the Government Accounting Office (GAO), roughly half of U.S. companies are set up as pass-throughs (e.g., subchapter S corporations, or partnerships), and thus taxes are paid by the owners or shareholders through personal tax returns. These companies are not the problem. Democratic Senators Byron Dorgan (ND) and Carl Levin (MI) claim too many large corporations used loopholes and other questionable (illegal?) methods to avoid paying any taxes at all.

I will be shocked if our pro-big-business readers don't have some explanation for how this is either acceptable or just "not a real problem." A subject for future debate, here?