As Americans prepare to file their tax returns this April, they may be surprised to learn that they're paying higher rates than some of the largest companies in the land.
On Feb. 3, President George W. Bush proposed a US$2.23 trillion budget that would leave the US with a record US$307 billion deficit. Given that gap, Federal Reserve Chairman Alan Greenspan has urged Congress to restrain spending and has questioned the president's proposal for US$690 million in new tax cuts.
"There should be little disagreement about the need to reestablish budget discipline," Greenspan told the House Financial Services Committee on Feb. 10.
Some lawmakers say the US needs to reestablish corporate tax discipline too. Enron Corp has avoided taxes in recent years with "incredibly complicated transactions," according to a report made public by the Senate Finance Committee on Feb. 13. The company set up 692 units in the Cayman Islands as part of a strategy to avoid taxes. The study called for new penalties to limit tax shelters.
"We are going to have the veil torn off the world of tax shelters and the world of manipulation of accounting," said Senator Charles Grassley, chairman of the Senate Finance Committee, as congressional investigators released the report this month.
Many US companies regularly -- and legally -- minimize their income taxes. In 2001, eight of the 30 companies in the Dow Jones Industrial Average, among them General Electric Co and Microsoft Corp, paid taxes amounting to less than 20 percent of their operating profit, according to Bloomberg data. The top 2001 tax rate for individuals was 39.1 percent.
Companies use a variety of methods to reduce taxes, ranging from credits for research to breaks on employee stock options.
When employees exercise their options, companies can take a tax deduction for the difference between what the employees pay for the stock and its market price. Such deductions cut Microsoft's tax bill by US$9.2 billion from 2000 to last year, says spokeswoman Caroline Boren.
``This is a standard deduction,'' Boren says.
General Electric has reduced its bill through tax-advantaged transactions done by its leasing unit, General Electric Capital Services, according to a 2000 study by the Washington-based Institute of Taxation and Economic Policy. From 1996 to 1998, GE received US$6.9 billion in tax breaks -- more than any other US company, according to the study.
In its 10-K filing with the US Securities and Exchange Commission, GE said its effective tax rate in 2001 was 27.8 percent. That's the rate at which GE was taxed on earnings after the company covered its costs and excluded one-time profits or losses from such variables as exchange rates. GE paid US$1.49 billion in taxes that year, the equivalent of 7.4 percent of its operating profit.
GE does business in more than 100 countries and has benefited from low tax rates outside the US, says spokesman David Frail.
The US has the fourth-highest corporate income tax rate in the 30-nation OECD, according to a January 2002 study by accounting firm KPMG International.
AIR SUPPORT: The Ministry of National Defense thanked the US for the delivery, adding that it was an indicator of the White House’s commitment to the Taiwan Relations Act Deputy Minister of National Defense Po Horng-huei (柏鴻輝) and Representative to the US Alexander Yui on Friday attended a delivery ceremony for the first of Taiwan’s long-awaited 66 F-16C/D Block 70 jets at a Lockheed Martin Corp factory in Greenville, South Carolina. “We are so proud to be the global home of the F-16 and to support Taiwan’s air defense capabilities,” US Representative William Timmons wrote on X, alongside a photograph of Taiwanese and US officials at the event. The F-16C/D Block 70 jets Taiwan ordered have the same capabilities as aircraft that had been upgraded to F-16Vs. The batch of Lockheed Martin
GRIDLOCK: The National Fire Agency’s Special Search and Rescue team is on standby to travel to the countries to help out with the rescue effort A powerful earthquake rocked Myanmar and neighboring Thailand yesterday, killing at least three people in Bangkok and burying dozens when a high-rise building under construction collapsed. Footage shared on social media from Myanmar’s second-largest city showed widespread destruction, raising fears that many were trapped under the rubble or killed. The magnitude 7.7 earthquake, with an epicenter near Mandalay in Myanmar, struck at midday and was followed by a strong magnitude 6.4 aftershock. The extent of death, injury and destruction — especially in Myanmar, which is embroiled in a civil war and where information is tightly controlled at the best of times —
Taiwan was ranked the fourth-safest country in the world with a score of 82.9, trailing only Andorra, the United Arab Emirates and Qatar in Numbeo’s Safety Index by Country report. Taiwan’s score improved by 0.1 points compared with last year’s mid-year report, which had Taiwan fourth with a score of 82.8. However, both scores were lower than in last year’s first review, when Taiwan scored 83.3, and are a long way from when Taiwan was named the second-safest country in the world in 2021, scoring 84.8. Taiwan ranked higher than Singapore in ninth with a score of 77.4 and Japan in 10th with
SECURITY RISK: If there is a conflict between China and Taiwan, ‘there would likely be significant consequences to global economic and security interests,’ it said China remains the top military and cyber threat to the US and continues to make progress on capabilities to seize Taiwan, a report by US intelligence agencies said on Tuesday. The report provides an overview of the “collective insights” of top US intelligence agencies about the security threats to the US posed by foreign nations and criminal organizations. In its Annual Threat Assessment, the agencies divided threats facing the US into two broad categories, “nonstate transnational criminals and terrorists” and “major state actors,” with China, Russia, Iran and North Korea named. Of those countries, “China presents the most comprehensive and robust military threat