Obama created lowest corporate tax rate since '72

Yep, bonus depreciation is just another example of how Obama is killing private business and job creation. Putting $55 billion back in Big Business's pockets is not nearly enough; it's practically Marxist. He needs to cut their taxes even more! They've hardly got enough cash to fuel up their private jets, for goodness sake!

Seriously though, the WSJ has been doing some serious reporting of late on corporate taxes. This came after pointing out that two-thirds of U.S. corporations pay no income tax. If you crumple and burn their ridiculous editorial pages, (or just ignore and recycle them, if you want to be eco-friendly), then WSJ ain't so bad.

With Tax Break, Corporate Rate Is Lowest in Decades

By Damian Paletta

February 3, 2012 | Wall Street Journal

U.S. companies are booking higher profits than ever. But the number crunchers in Washington are puzzling over a phenomenon that has just come into view: Corporate tax receipts as a share of profits are at their lowest level in at least 40 years.

Total corporate federal taxes paid fell to 12.1% of profits earned from activities within the U.S. in fiscal 2011, which ended Sept. 30, according to the Congressional Budget Office. That's the lowest level since at least 1972. And well below the 25.6% companies paid on average from 1987 to 2008.

Corporate income-tax receipts typically fall during recessions, and they declined sharply after the 2008 financial crisis, which wiped out big swaths of profits across the huge financial sector. But U.S. profits have rebounded sharply in recent quarters, while tax receipts have stayed low.

So where is the money? There are a lot of moving pieces, budget watchers say, but one view shared inside Washington is that a temporary tax break—supported by both political parties—is a key reason.

This tax break, known as "bonus depreciation," has allowed companies to write off investments in goods like industrial equipment, manufacturing machinery and computers in the year in which they're bought rather than over time. The White House estimates the subsidy has saved companies roughly $55 billion in corporate income taxes over each of the past two years.

Companies just reporting fourth-quarter earnings made clear they have aggressively taken advantage of the tax break, which lasted in full through December.

Union Pacific Co. said the benefit lowered the railroad's taxes by $450 million last year compared with the year before. Energy company Dominion Resources Inc. has said the bonus depreciation provision will cut its income taxes by $1.2 billion to $2.1 billion in 2011 through 2013, even as the tax break shrinks. Shedding light on its 2011 taxes, Time Warner Cable Inc. said it expects to pay $700 million more in taxes this year, assuming capital expenditure is flat, now that the stimulus benefit is lower.

The tax break spurred purchases. Another railroad, Kansas City Southern, said it accelerated investment in 30 new locomotives last year to capture the bonus depreciation. Truck maker OshKosh Corp. said the deduction inspired its customers to speed up purchases of its trucks. General Motors Co. on Wednesday attributed some of the drop in sales of SUVs and pickup trucks in January to higher purchases in December by corporate customers that wanted to capture the accelerated depreciation.

The tax break shrinks for calendar 2012. Now, companies can write off only half of their investments, but the White House has proposed expanding it to again cover 100%. The White House estimated this would cost roughly $5 billion, as it only accelerates deductions businesses would otherwise have taken over time. Business groups have supported the tax break, and some are now lobbying Congress to extend it through 2012.

The breaks may be helping stanch a years-long economic downturn, but they are also extracting their own price. Companies paid just $181 billion in federal corporate taxes in fiscal 2011, about 8% of the $2.3 trillion in total revenue collected by the federal government. That's down from 15% of the total in 2007.

Individuals, meanwhile, paid $1.1 trillion in income taxes last year. Much of the rest comes from the taxes that fund Social Security and Medicare, which are paid by employers and employees.

Earlier this week, the CBO raised its projection for the government's 2012 budget deficit from $973 billion to close to $1.2 trillion, in part because of "disappointingly low corporate tax receipts of the sort that's a little puzzling," CBO director Douglas Elmendorf said.

The CBO cut its projections for 2012 corporate income taxes from $279 billion to $251 billion. It expects them to rebound to $427 billion in 2014 as the tax breaks ends.

The White House is gearing up to propose overhauling the complicated U.S. corporate tax code. Beyond the partisan bickering that's sure to ensue, the White House will need the business community's support for its effort, and companies might be reluctant when current rules work in their favor.

The U.S. has one of the highest corporate tax rates in the world, with a combined top state and federal rate of 39.2%. But many companies pay much less because of a number of tax breaks and other provisions that reduce their tax bills.

There also has been an increase in the number of firms structured as "pass-throughs," which pay no federal corporate income tax and instead distribute their profits to investors, who pay taxes on the income as individuals.

Traditionally, the vast majority of corporate income taxes are paid by businesses with more than $250 million in assets. The Internal Revenue Service hasn't published data on the breakdown in corporate filers since 2008, so it couldn't be learned whether that proportion had changed in the last few years.

Business groups expect tax collections to turn back up soon as tax subsidies expire and once past losses can no longer be carried forward to offset profits.

"Everybody is expecting it to come back up," Martin A. Regalia, chief economist at the U.S. Chamber of Commerce, said of corporate tax receipts. "It's just being delayed because of the depth of the recession."