A new survey from the Pew Research Center has revealed some surprising information about Americans’ feelings on taxes. While most see the nation’s federal tax system as broken beyond repair, they aren’t particularly put out by the amount they personally have to pay on April 15 (53% think their tax burden is “about right”). Rather, they’re upset because they think corporations and wealthy people aren’t shouldering their fair share of the tax burden.
Only 27% of respondents said that the amount they paid in taxes bothered them a lot, but 64% said “the feeling that some corporations don’t pay their fair share” was a major concern. Twenty-eight percent went so far as to name corporate tax dodging the single biggest problem with the U.S. tax system. The rich came in for some criticism as well, as 61% of people were bothered by wealthy Americans who they think aren’t paying enough in taxes.
Frustration with the way corporations are taxed cut across political lines. Seventy-five percent of Democrats, 64% of independents, and 52% of Republicans were troubled by the low taxes paid by big businesses. That’s somewhat surprising, considering that the U.S. has one of the highest corporate tax rates in the world, at least on paper, at 40%. That’s well above the global average of 23.64%, as determined by accounting firm KPMG.
In reality, many U.S. corporations pay taxes at a rate far lower than 40%. The Government Accountability Office (GAO) took a closer look at how much profitable U.S. corporations actually paid in federal taxes in 2010 and came up with 13%. That’s lower than the average rate of 18.1% paid by U.S. households in 2010, according to the Tax Policy Center. And many corporations aren’t paying any federal taxes at all. A separate GAO report found that 55% of U.S. corporations had at least one year without any federal tax liability between 1998 and 2005.
Generous tax subsidies are to blame for low corporate tax rates, according to a report by the advocacy group Center for Tax Justice. The CTJ analyzed the taxes paid by 288 large companies over a four-year period and found that they collectively received $364 billion in tax subsidies. “The fact that the law allows America’s biggest companies to shelter almost half of their U.S. profits from tax, while ordinary wage-earners have to report every penny of their earnings, has to undermine public respect for the tax system,” argues the CTJ.
Many business leaders also agree, at least in principle, that corporate tax reform is necessary. Sixty-one percent of U.S. business executives surveyed by CNBC/Burson-Marsteller in 2014 thought that corporations tended to take advantage of tax loopholes. One such loophole that reformers want to close is a quirk in the U.S. tax code that allows corporations to shelter profits offshore and not pay federal taxes on them until the money is transferred back to the parent company. “We as a country have to do something with the international tax code,” Jeff Lasher, the chief financial officer of Crocs, told the Wall Street Journal.
Changing the corporate tax code might also start to shift Americans’ opinions about big business in general. When Americans were asked in 2014 what first came to mind when they thought of corporations, the most common answer was “greed,” according to the CNBC survey. A fairer tax system might be a step toward changing that attitude.