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Here are the actual tax rates the biggest companies in America pay

Disney is among the giant companies that will see major improvements to their bottom lines if President Trump gets his way with a maximum federal corporate income-tax rate of 20%.

Articles such as this one make a subtle and misleading point - that the US 35% statutory tax rate is not important, because corporations are able to game the system to get their effective rates down to a much lower number.

Take a close look at the companies on the list of the lowest effective tax rates (ETR) and tell me what you see. I'l help you out - they are all huge multinationals. They have a substantial part of their business outside the US and engage in aggressive tax planning to minimize their tax burden outside the US. They arrange their non-US business structures in such a way as to pay very little corporate income tax outside the US. Then, they report low ETRs in their financial reports (from which the ETRs cited in this article are taken) because (1) the US does not tax foreign earnings until repatriated and (2) the companies claim the money is "permanently invested outside the US."

I am willing to bet good money that the US operations of most of these companies, if segregated, would have an ETR of 30% to 40%. That's because when you operate solely in the US, you have to pay the statutory rate. Unless you have a special tax break, such as deferral of tax on foreign earnings, you can't avoid paying the statutory rate. Your local mom and pop operation pays the statutory rate (they do get the benefit of lower brackets for taxable income less than $18.67MM) because they have no special breaks. That's why the Trump tax plan is calling for a cap of 25% on the tax rate for individual business owners.

Please don't be misled by articles such as this that make you say, 'Oh, who cares about the statutory tax rate, corporations can always finagle their way out of it.' As the above should make clear, the statutory rate is VERY important - otherwise, the huge multinationals would not have such incredibly huge offshore cash hoards, and base so much of their businesses outside the US. If we want business to invest in the US, we need a lower statutory tax rate.


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