Where is the US economy headed?

Ant it says tax cuts cost jobs? What about the possibility that far more jobs would have been lost without tax cuts? In other words, I want actual evidence of the assertion, not somebody's opinion. And that is ci's responsibility, he made the claim, let him back it up.

It works both ways too - after all, Conservatives continually claim that tax cuts lead to more jobs. But they are always really nebulous on exactly how that happens; and they never account for the fact that after tax cuts, new jobs don't usually start showing up for several years, or the fact that sometimes jobs rise after tax raises, too - like in the 90's.

Cycloptichorn

The corporate federal Income tax is 35 % of Profits - one of the highest rates in the developed world. Most states also levy income taxes on corporations, amounting to about 7% on average.

Whether you believe it is nebulous or not, it is a term long used by economists of all persuasions to describe aspects of human nature that do indeed bear on human activity. Do you deny that human nature is a significant element of the problem?

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Perhaps you would care to enlighten us on the average income tax rate paid by corporations in this country. I run a business. We provide scientific, engineering, and construction management services to our customers. We pay 35% exactly to the feds and an average of about 7% to state governments. The same is true of just about every business from which you buy the goods and services that you consume.

Billions and billions
Over the 2001-2003 period, the 275 Fortune 500 companies that were profitable each year and for which adequate information is publicly available earned almost $1.1 trillion in pretax profits in the United States. Had all of those profits been reported to the Internal Revenue Service (IRS) and taxed at the statutory 35 percent corporate tax rate, then the 275 companies would have paid $370 billion in income taxes over the three years. But instead, the companies reported only about half of their profits - $557 billion - to the IRS. Instead of a 35 percent tax rate, the companies as a group paid a three-year effective tax rate of only 18.4 percent.

In 2002 and 2003, the 275 companies sheltered more than half of their profits from tax. They told their shareholders they earned $739 billion in those two years, but they paid taxes on less than half of that, only $363 billion.

Loopholes and other tax subsidies cut taxes for the 275 companies by $43.4 billion in 2001, $60.8 billion in 2002 and $71.0 billion in 2003, for a total of $175.2 billion in tax breaks over the three years.

Half of the total tax-break dollars over the three years - $87.1 billion - went to just 25 companies, each with more than a billion-and-a-half dollars in tax breaks.

General Electric topped the list of corporate tax break recipients, with $9.5 billion in tax breaks over the three years.

Industrial divide
Effective tax rates varied widely by industry. Over the 2001-2003 period, industry effective tax rates for the 275 corporations ranged from a low of 1.6 percent to a high of 27.7 percent.

In 2003, the range of industry tax rates was even greater, ranging from a low of -30.0 percent (a negative rate) up to a high of 27.9 percent.

* Aerospace and defense companies enjoyed the lowest effective tax rate over the three years, paying only 1.6 percent of their profits in federal income taxes. This industry's taxes declined sharply over the three years, falling to -30.0 percent of profits in 2003.
* Other very low-tax industries, paying less than half the statutory 35 percent tax rate over the entire 2001-2003 period, included: transportation (4.3 percent), industrial and farm equipment (6.2 percent), telecommunications (7.5 percent), electronics and electrical equipment (10.8 percent), petroleum and pipelines (13.3 percent), miscellaneous services (14.4 percent), gas and electric utilities (14.4 percent), computers, office equipment, software and data (16.0 percent), and metals & metal products (17.4 percent).
* Not a single industry paid an effective tax rate of more than 29 percent, either for the entire three-year period or in any given year.

Within industries, effective tax rates also varied widely. For example, over the three-year period, average tax rates on oil companies ranged from 3.0 percent for Devon Energy up to 31.4 percent on Marathon Oil. Among aerospace and defense companies, three-year effective tax rates ranged from a low of -18.8 percent for Boeing up to a high of 25.0 percent for General Dynamics.

How they do it
There are myriad reasons why particular corporations paid low taxes. The key major tax-lowering items revealed in the companies' annual reports - plus some that are not disclosed - include:

Accelerated depreciation. The tax laws generally allow companies to write off their capital investments considerably faster than the assets actually wear out. This "accelerated depreciation" is technically a tax deferral, but so long as a company continues to invest, the tax deferral tends to be indefinite. In 2002 and again in 2003, Congress passed and President Bush signed new business tax breaks totaling $175 billion over the 2002-2004 period. These new tax subsidies centered on a huge expansion in accelerated depreciation, coupled with rules making it easier for companies with an excess of tax breaks to get tax rebate checks from the Treasury by applying their excess tax deductions to earlier years and still other new tax subsidies.

Atop the list of accelerated depreciation beneficiaries are SBC Communications, with $5.8 billion in accelerated depreciation tax savings, Verizon (with $4.5 billion), Devon Energy ($4.4 billion), ExxonMobil ($2.9 billion) and Wachovia ($2.8 billion).

Stock options. Most big corporations give their executives and other employees options to buy the company's stock at a favorable price in the future. When those options are exercised, corporations can take a tax deduction for the difference between what the employees pay for the stock and what it is worth. But in reporting profits to shareholders, companies do not treat the effects of stock-option transactions as business expenses - based on the arguable theory that issuing stock at a discount doesn't really reduce profits because the market value of a company's stock often has only a very attenuated relation to earnings.

The corporate tax benefits from stock option write-offs are quite large. Of the 275 corporations, 269 received stock-option tax benefits over the 2001-2003 period, which lowered their taxes by a total of $32 billion over three years. The benefits ranged from as high as $5 billion for Microsoft over the three years to tiny amounts for a few companies.

Overall, tax benefits from stock options cut the average effective corporate tax rate for the 275 companies by 3 percentage points over the 2001-2003 period.

The benefits declined after 2001, however, falling from $13 billion in 2001 to about $9.5 billion a year in 2002 and 2003. The tax-rate effects of stock options are likely to continue to decline as accounting standards are changed to reduce the disparity between the book and tax treatment of options.

Tax credits. The federal tax code also provides tax credits for companies that engage in certain activities - for example, research (on top of allowing immediate expensing of research investments), certain kinds of oil drilling, exporting, hiring low-wage workers, affordable housing and supposedly enhanced coal (alternative fuel). As credits, these directly reduce a company's taxes.

Some credits have unexpected beneficiaries. For instance, Bank of America cut its taxes by $580 million over the 2001-2003 period by purchasing affordable-housing tax credits. Clorox saved $36 million, Kimberly-Clark, $115 million, and Illinois Tool Works, an unspecified amount, from those same credits. Bank of New York obtained $100 million in alternative fuel credits over that period. Marriot International operates four coal-based synthetic fuel facilities solely for the tax benefits, which cut Marriot's taxes by $233 million in 2003 and $159 million in 2002.

Offshore tax sheltering. Over the past decade, corporations and their accounting firms have become increasingly aggressive in seeking ways to shift their profits, on paper, into offshore tax havens, in order to avoid their tax obligations. Some companies have gone so far as to renounce their U.S. "citizenship" and reincorporate in Bermuda or other tax-haven countries to facilitate tax sheltering activity.

Not surprisingly, corporations do not explicitly disclose their abusive tax sheltering in their annual reports. For example, Wachovia's extensive schemes to shelter its U.S. profits from tax are cryptically described in the notes to its annual reports merely as "leasing." It took extensive digging by PBS's Frontline researchers to discover that Wachovia's tax shelter involved pretending to own and lease back municipal assets in Germany, such as sewers and rail tracks, a practice heavily promoted by some accounting firms. Other tax shelter devices, such as abuses of "transfer pricing," also go unspecified in corporate annual reports. Nevertheless, corporate offshore tax sheltering is estimated to cost the U.S. Treasury anywhere from $30 billion to $70 billion a year, and presumably the effects of these shelters are reflected in the bottom-line results of what companies pay in tax.