U.S. Corporations Are Major Contributors to U.S. Tax Revenues

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U.S. Corporations Are Major Contributors to U.S. Tax Revenues

Business Wire via NewsEdge :

Business Editors

WASHINGTON–(BUSINESS WIRE)–February 25, 2009–A survey released today by PricewaterhouseCoopers LLP and Business Roundtable details the significant contributions major corporations make to U.S. tax revenues. The 40 companies participating in the survey remitted $94 billion in taxes, of which $28.5 billion were federal and state corporate income taxes. These companies employed 1.6 million U.S. workers and paid $122 billion in wages and salaries.

The total tax rate among U.S. corporations surveyed was 36.4 percent in 2007, near the highest among surveyed countries. The United States has the second-highest corporate tax rate among the 30 member countries of the Organization for Economic Cooperation and Development (OECD). However, this only partly explains the high total tax rate, according to PricewaterhouseCoopers’ Total Tax Contribution (TTC) methodology, which also takes into account non-income taxes that are part of a corporation’s “total tax contribution.” Non-income taxes have only limited visibility on financial statements but add $62 of tax liability to every $100 of corporate income tax paid by U.S. survey participants.

U.S. corporations also serve as tax collectors for the government, collecting and remitting $169 in sales, excise, withholding and other customer and employee taxes for every $100 of corporate income tax payments.

“Although they are most visible, corporate income taxes are just one of a plethora of taxes borne by U.S. companies. Beyond income taxes, businesses are liable for a host of other domestic levies imposed by federal, state and local governments, as well as substantial costs to comply with these tax obligations,” said Peter Merrill, a principal with the National Economics & Statistics group in PricewaterhouseCoopers’ Washington National Tax Services office. “Our Total Tax Contribution analysis provides a more complete picture of companies’ contributions to government revenues.”

The high total tax rate paid by U.S. companies is partly due to the heavy reliance in the U.S. on taxes borne by business as compared to taxes collected by business. The share of total taxes that are borne by business is higher in the U.S. (49.1 percent) than in any other country surveyed. The United States is the only OECD country that does not have a value-added tax, and thus is more heavily reliant on taxes borne by business, such as income and property taxes.

The report reveals that U.S. corporations need an average of 44 full-time staff to comply with federal, state and local tax payment obligations, more than three times the staff required in any of the other countries surveyed. This is, in part, due to the decentralized nature of the U.S. tax system — U.S. companies are potentially liable for more than 1,100 taxes imposed by the 50 states and the District of Columbia, as well as 89,000 local jurisdictions with local taxes too numerous to count. Although state and local taxes account for only 24.5 percent of U.S. taxes borne and collected, companies spend 41.7 percent of their compliance budget on these taxes.

The report finds that U.S. companies make a major tax contribution as employers, with employment-related taxes the largest share of taxes remitted (43.5 percent). In fact, survey participants remitted $25,889 in employment-related taxes per U.S. employee in 2007, representing more than one-third of employee compensation for these companies.

“Business Roundtable companies are committed to doing their part to sustain American economic prosperity, but it is crucial that our nation’s tax system be internationally competitive, taking into consideration all taxes levied on corporations,” said John Castellani, President of Business Roundtable. “The results of the Total Tax Contribution survey provide valuable insight into the amount of tax paid by many of America’s largest companies, and we hope the information will be a useful tool in framing future tax policy discussions.”

“In today’s international economy, capital and innovation quickly flow to countries with welcoming economic policies. As a result, corporate tax rates have a huge impact on the ability of a country to attract investment and foster high-quality, well-paying jobs,” Castellani added. “Our member CEOs believe, and recent OECD research confirms, that corporate taxes are harmful to national economic growth, and thereby impede rising standards of living for workers and their families.”

The Total Tax Contribution framework, developed by PricewaterhouseCoopers, has been used to survey the taxes paid by corporations in Australia, Belgium, Canada, South Africa and the United Kingdom. In addition, the TTC framework has been adopted by the World Bank to compare tax burdens across 181 countries in its annual Doing Business report.

Business Roundtable commissioned PricewaterhouseCoopers LLP to conduct the first U.S. survey of taxes paid by corporations to inform the discussion on corporations’ contributions to government revenues and the competitiveness of the U.S. tax system.

Visit www.businessroundtable.org to download a copy of the Total Tax Contribution report.

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  • So, you didn’t hustle and pay them back. How much mnyuploement did you receive? How much have you paid back in 2009 and how much do you expect to pay back in 2010?You will report the amount you received in 2009 on your tax return. If the 1099-G does not subtract out the repayment, you will with a code on your tax return. You can ONLY include the amounts actually paid back in 2009. The federal withholding will not change that’s just added to the withholding from any W-2 onto your tax return.The money you pay back in 2010 will be counted as income in 2009. In 2010, if you pay back more than $3000, you will get the excess tax back (method II in publication 525). If you pay back $3000 or less, you get a lousy schedule A deduction that most people cannot use.