Wednesday, February 02, 2011

For Many Companies, Low Taxes Are Key To Profits


During his State of the Union address, President Obama said the current tax system is broken.

"Those with accountants or lawyers to work the system can end up paying no taxes at all," he said. "But all the rest are hit with one of the highest corporate tax rates in the world. It makes no sense, and it has to change."

Just how broken is the corporate tax system? Consider the tax rate paid by two of America's biggest companies — Wal-Mart and General Electric. Wal-Mart paid 34 cents in taxes for every dollar of profit it made in the past three years. General Electric paid just 3.6 cents on the dollar.

Welcome to the mysterious world of the corporate income tax, says tax expert Len Burman at Syracuse University. "There are big companies that consider their tax departments to be profit centers," he says.

That's right; instead of concentrating on making light bulbs, power plants or whatnot, companies use the tax system to boost their profits.

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