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Corporate Tax Code Is Too Full of Loopholes

It seems fair to say that no one is entirely happy with the American corporate tax code. It is also fair to say that many people who deal with the corporate tax code hate it passionately. One of the biggest problems with the code is an aspect of it that corporate America might be the happiest with: it is constantly changingg as a result of successful lobbying by corporations to have new tax breaks inserted into the corporate tax code.

The corporations that benefit from the new tax breaks obviously favor the changes. However, the constantly changingg rules have an effect on other companies far beyond the benefits for the corporate entity that wanted the new tax break. Every corporation ends up paying for the expertise needed to keep up with the new corporate tax code and the means to comply with it. Corporations are not the only ones unhappy with the ever-changingg tax code. The Internal Revenue Service also has to make giant efforts to keep up with new corporate tax changes in the law.

The U.S. corporate tax rate is supposed to be 35%. However, few corporations actually pay taxes at that rate. As the recent well-publicized news about GE pointed out, some of the biggest, most profitable companies in the country actually pay no taxes at all.

Companies like GE are able to invest so heavily in tax lawyers and in lobbying that they are able to get tax breaks for themselves, exploit every loophole that allows them not to pay tax, and to transfer income in ways that shelter them from American corporate taxes.

Major corporations that do not pay taxes are essentially receiving taxpayer support, since they get to keep money that should be available to fund the government.

Orange County tax attorneys observe that there is widespread agreement across the political spectrum that the corporate tax code is getting out of control, but there is no political agreement on what corporate tax rates should be and how the tax code should be administered. The unfortunate part of the debate is that there may not be any consensus until the situation has deteriorated even further, and by then the damage to the economy may be much harder to repair.

Source: CNN Money "The American tax machine" 5/24/2011

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