U.S. Firms Pay No Taxes

U.S. corporations paid less taxes in 1981 than in 1980, in part because of President Reagan's tax breaks to industry. This is the conclusion of the non-profit organization, Tax Analysts, based in Arlington, Virginia, which recently published a study on the effective tax rates on U.S. corporate income in 1981.

U.S. companies are nominally assessed a 46�7o income tax. But the study claims that through loopholes and tax breaks, a number of companies paid no taxes, even though they earned millions of dollars in the U.S. last year.

• The armaments manufacturer, Northrup, had U.S.-based income of $67.7 million last year, but reported a net tax credit of $69.7 million.
• McDonnell Douglas had U.S. earnings of $203.8 million; it claimed a net credit of $53.0 million.
• Dow Chemical had U.S. earnings of $516 million; it, too, paid no taxes, writing down a net credit of $40.2 million.

Commercial banks paid the least amount of income taxes the study says. Banks enjoyed a -12.601o effective tax rate. That is, on average they paid no income tax and actually received credits amounting to 12.6% of their income. Bankers Trust led the pack with a tax rate of -92.4010; Chase followed with -44.1%; and Bank of America recorded a rate of -15.4%.

These negative tax rates, or tax credits, that companies report do not mean that the U.S. government will reimburse these companies, however. The figures represent non-refundable tax credits that companies can use to offset earnings in future years.