GAO to Sanders: Many companies had no tax liability

Many corporations — even some that are large and profitable — have had no federal income tax liability in past years, a Government Accountability Office report prepared for Democratic presidential candidate Bernie Sanders found.

At least two-thirds of active U.S. corporations had no federal tax liability in each year from 2006 to 2012. About 42 percent of large corporations had no federal income tax in 2012, and nearly 20 percent of profitable large corporations had no liability that year, the GAO said in its report.

{mosads}“There is something profoundly wrong in America when one out of five profitable corporations pay nothing in federal income taxes,” Sanders said in a news release issued by his Senate office.

The GAO report was addressed to Sanders (I-Vt.) in his role as the ranking member of the Senate Budget Committee.

“Large corporations cannot continue to get more tax breaks when children in America go hungry,” Sanders added. “We need real tax reform to ensure that the most profitable corporations in America pay their fair share in taxes.”

The GAO said that there are several reasons why corporations have no federal tax liability. In each year from 2008 to 2012, about half of all active corporations had negative net tax income. Other companies had positive net tax income that was completely offset by operating loss deductions that were carried forward from previous years.

While the top statutory corporate tax rate is 35 percent, the federal effective tax rate for profitable large corporations was 14 percent on average from 2008 to 2012. Effective rates are well below 35 percent for reasons including that corporations’ U.S. taxes are reduced by their foreign tax credits and that companies take advantage of tax incentives such as bonus depreciation, the GAO said.

Sanders has proposed ending corporations’ ability to defer taxation on profits earned overseas.

In his recent interview with the New York Daily News editorial board, Sanders asserted that General Electric doesn’t pay taxes. But GE Chief Executive Jeffrey Immelt responded that that claim was false.

“We pay billions in taxes, including federal, state and local taxes. The U.S. tax system has not been updated in 30 years and isn’t designed for today’s economy, which is why we support comprehensive tax reform — even if it raises our tax rate,” he said in an op-ed in The Washington Post.