Yesterday, President Obama proposed $1.5 trillion in new taxes on the rich along with a plan to reduce the long-term deficit by $3 trillion. The President announced, “It’s only right that we ask everyone to pay their fair share.” Apparently, this caught the attention of a few big corporations.
A group of multinational companies wrote a letter to President Obama calling for a lower corporate tax rate. The companies include Boeing (NYSE:BA), AT&T (NYSE:T), Verizon (NYSE:VZ), FedEx Corp (NYSE:FDX), Walt Disney (NYSE:DIS), and Altria Group (NYSE:MO). The letter stated, ” We believe the cornerstone of reform must be a significantly lower statutory corporate tax rate.” The group is willing to close certain tax breaks, as long as the corporate tax rate is addressed. The letter goes on to explain, ” Importantly, in our current deficit environment, we understand that many tax expenditures must be eliminated and/or reduced in order to achieve a meaningful corporate rate reduction.”
Although the US corporate tax rate can be as high as 35%, companies such as group member Verizon pay substantially less. A Forbes report released earlier in the year reveals that Verizon has a 10.5% tax rate. That’s better than a long term capital gain. Although Verizon earned $11.6 billion in pretax income, they have diverted much of their income through foreign wireless partner Vodafone. Furthermore, companies such as General Electric (NYSE:GE) actually made money on their tax return. Although the industrial behemoth generated $10.3 billion in pretax income, they recorded a tax benefit of $1.1 billion.