Dear Editor,
We’re approaching the annual proxy season, when many publicly traded companies schedule their annual shareholder meetings and release their 10-Ks, which report the prior year’s financial results. While it doesn’t get much media coverage, there’s an important number that people should be aware of: the effective tax rate of the company.
If you don’t know what the effective rate of a company is, it’s the amount the company actually pays in taxes. The government sets the corporate tax rate, but companies pay an effective tax, which reflects legal accounting treatments plus legal deductions, and most of the time, companies' effective taxes are much, much lower than the corporate tax rate.
So low that many companies don’t make a big deal about it (it would anger most people). But the data is publicly available through their annual 10-Ks, and a simple calculation will give you the number (the effective tax rate equals total taxes divided by earnings before taxes). While a Wall Street financial analyst might like a low number, it takes on a whole new meaning when Republicans scream that big corporations need more tax breaks.
These companies already get huge breaks as their effective tax rates show. (Many companies pay in the single digits.) While you or I have a tax liability of anywhere between 10% to 37%, no Republicans are screaming that we should get tax breaks. Instead, they’re contemplating increasing our taxes and increasing small business fees, while pushing more cuts for big business.
Large companies do not need more tax breaks. They have lots already. The middle-class needs tax breaks and we need them now!
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