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Chamber Chief Economist Clarifies Business Tax Data

Thursday, August 21, 2008 - 8:00pm

Calls on Media to Get Facts Straight

WASHINGTON, D.C.–-United States Chamber of Commerce Chief Economist Martin Regalia today issued the following statement following news reports about the Government Accountability Office (GAO) report on corporate tax liabilities (Comparison of the Reported Tax Liabilities of Foreign- and U.S.-Controlled Corporations, 1998-2005, GAO-08-957):

"Once again, the GAO data has been twisted and misinterpreted by those seeking to attack corporate America. Many news reports claim that the GAO study revealed that almost two-thirds of companies in the U.S. usually pay no corporate income taxes. What the GAO report actually said was that for the period between 1998 and 2005, corporations—not necessarily the same corporations—had no tax liability for one of the eight years in question. If two-thirds of all corporations were paying no taxes for all eight years, we would be reading about a Department of Justice (DOJ) or Internal Revenue Service (IRS) investigation into the matter and not some synopsis of a GAO report.

"There's a difference between not paying taxes owed and not having a tax liability. The GAO report doesn't say that businesses aren't paying taxes they owe. Rather, it says that some corporations did not have tax liabilities—in other words, they did not owe taxes. So how do corporations avoid having tax liabilities? They don't make any profits. You can have many billions of dollars in revenue and still have R&D, labor-related and other expenses that are larger than your revenues—and therefore no "income" to tax.

"The situation with corporations is not all that different from that with individuals. IRS data show that for 2005 – the last year of the GAO study – of the 134 million individual income tax returns filed, approximately one-third – 44 million – showed no income tax liability whatsoever. And this does not even account for all those individuals who had insufficient income to even have to file income tax returns (unlike corporations).

"In sum, the idea that there is a large pool of corporations not paying taxes that they legally owe is just incorrect. Maybe misrepresenting the data or using it to make a false argument is just the media's way of trying to make a report that really says nothing into a scintillating, scandalous story. It wouldn't be the first time."

The U.S. Chamber is the world's largest business federation representing more than 3 million businesses and organizations of every size, sector, and region.

www.uschamber.com

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