Corporate income tax payments, as a percentage of federal revenue receipts, have been withering away over the last three decades to a level that would shock millions of individual taxpayers who, quite predictably, are holding up an increasing share of the federal tax burden.
In what must be among the least publicized figures in Washington, corporate tax payments declined from 33.6 percent of total federal receipts in fiscal 1944, to 30.3 percent in 1954, to 20.9 percent in 1964, to an estimated 14.6 percent in 1974.
In contrast, according to Treasury Department figures, individual income tax payments (including the full social security tax which is really borne by the employee) rose from 48.5 percent in 1944, to 52.7 percent in 1954, to 62.7 percent in 1964, to an estimated 73.9 percent in 1974. The remaining tax payments have come from excise, estate, gift and other miscellaneous taxes,
THIS DECLINE in the corporate tax burden has occurred against an increase in the formal corporate income tax rate from 31 percent in 1944, to 52 percent in 1954, which was followed by a slight decrease try 50 percent in 1964 and 48 percent in 1974.
To further place the declining corporate income tax burden in its federal context, corporate profits as a percent of gross corporate product went from 22.6 percent in 1944, to 18.4 percent in 1954, to 17.6 percent in 1964 and an estimated 18.1 percent in 1974.
If the level of the statutory tax rates and actual corporate profits cannot explain why the effective tax rate payment has declined so sharply, what can? Here is where layer after layer of tax privileges, or “loopholes” in common parlance, have had their effect year after year.
They are not exactly household names, but the “depletion allowances,” “intangible drilling expenses,” “investment tax credits,” “asset depreciation range,” and a dictionary’s list of other tax preferences have built up this corporate welfare system out of Washington to the annual level of billions of dollars.
WHAT IT AMOUNTS to in the first place is an inequitous tax system that makes middle- and lower-income taxpayers pay more than they should so that corporations and wealthy investors (who benefit from corporate tax loopholes) pay less than they could. So the many who have little subsidize the few who have much.
“Many oil companies, for example, pay at an effective federal income tax rate of under 6 percent per year while multimillionaires pay an even lower percentage of their net income or escape the federal tax altogether, That is not all.
Former IRS Commissioner Former IRS Commissioner Johnnie Walters, on more than one occasion, expressed deep concern over sophisticated corporate tax evasion. The wide-open opportunities for multi-national companies to take advantage of numerous dubious or illegal means of playing one country off against another in the international tax game have been exposed but still await reform.
Add to this the many imaginative ‘accounting strategies employed by hundreds of corporations in complex ways and it is not difficult to understand why the understaffed teams of corporate tax auditors, assigned by the Treasury to these corporate giants, live in a world of subdued despair.
IN RECENT DAYS, corporate executives are once again telling the White House that they need even more ”tax incentives,” as they call them, or “welfare payments,” as they should be described. Such incentives are needed, these industrial leaders say, to increase investment in plants and equipment.
This corporate cry is becoming a routine Washington refrain — more tax subsidies for companies who vaguely promise more investment. But when they get their special tax reductions, the public is not shown what they receive in return.
Back in 1971, corporations received a massive tax bonanza from Congress and the Nixon administration. These included special export promotion tax relief, faster depreciation write-offs, and a 7 percent investment tax credit. From what information is available, these windfalls are producing neither the additional investment nor the robust economic expansion and productivity which the lawmakers were told to expect.
GIVEN THIS unrequited subsidy, which directly burdens the small taxpayer, why is there not an annual evaluation by the Congress or the Treasury of such special corporate tax privileges? The small taxpayers should he informed about what they are not receiving in return for their subsidizing of these companies through the tax system.
Readers interested in more information on who bears the tax burden in America can-send a stamped, self-addressed envelope to “People and Taxes,” P. 0. Box 19404, Washington, D. C. 20036.