The Democrats target companies with giant profits but tiny tax bills

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The minimum corporate tax may skew investment incentives—and make a messy tax code even more complicated

The structure of the minimum tax looks simple enough. Companies that report more than $1bn in profits to shareholders would pay a tax of at least 15% on those profits. The levy would be explicitly aimed at firms such as Amazon, which had an effective federal income-tax rate of just 4.3% from 2018 to 2020, far below the statutory rate of 21%, according to the Institute on Taxation and Economic Policy, a left-leaning think-tank. All told, the new tax would apply to some 200 big companies.

Democrats had hoped at first to rely on a general increase in the corporate-tax rate to raise revenues. But Kyrsten Sinema, a Democratic senator from Arizona whose support is needed for the bill to pass, opposed the wider increase and has instead backed the minimum tax as “commonsense”. The idea also has the approval of Joe Manchin, a Democratic senator from West Virginia, whose vote could prove decisive.

The gap between taxable income and book income as reported to shareholders exists for a reason. When, say, a company builds a factory, financial rules require it to spread the cost over many years based on depreciation, letting investors know the value of its assets. Tax rules, however, let firms report costs when incurred. That lowers tax bills when investments are made and encourages more spending.

 

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Corps aren't 'rich'. Their owners/shareholders are. Income-Tax THEM & ScrapCorpTax.

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