Edward Conard

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GAO Misleadingly Claims 70% of Companies Pay No Taxes

The GAO recently published a misleading headline that claimed: “from 2006 to 2012, at least two-thirds of all active corporations had no federal income tax liability.” While true, that’s because most businesses are unprofitable. According to analysis of the report by AEI’s Aparan Mathur, companies paid taxes equal to 32% of taxable income. While companies paid only a 16% tax rate on pre-tax income, that’s because companies had tax loss carry forwards from prior years. Even ardent tax reformers haven’t proposed taxing unprofitable companies! It’s disappointing when academic studies allow headlines to mislead the public.

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