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ExxonMobilIt's widely known that billionaire Warren Buffett and millionaire President Obama pay taxes at a lower rate than their secretaries, who make much less.

This "inequality" led them to devise a plan to hike the minimum tax rate on the top 0.3% of taxpayers -- now referred to as "The Buffett Rule."

But what's even more shocking is that American citizens collectively pay higher income tax rates than General Electric, Boeing, DuPont, and countless other companies.

Tiny Tax rates for Trillionaires

A recent study examined 280 of the largest companies in America and the taxes they paid in 2008, 2009, and 2010. All were Fortune 500 companies. And all were profitable. In fact, their pre-tax profit over that period totaled $1.4 trillion.

Yet a whopping 25% of them paid federal taxes at a rate of less than 10% (compared to the standard 35% corporate tax rate). And 30 of these companies paid absolutely no income tax on their profits between 2008 and 2010.

The 78 companies that enjoyed at least one year of paying no income tax had profits equaling $156 billion.

Yet instead of the $55 billion in tax revenue you'd assume the government would have received (at the 35% corporate rate), these companies (all of which -- again -- were profitable) received refund checks from the government totaling $21.8 billion.

We're talking corporate giants ranging from Duke Energy and Eli Lilly to ExxonMobil and Goldman Sachs.

Eliminate these tax breaks, and the U.S. Treasury would be $473 billion richer today.

Even worse, 134 of the 280 companies examined were content paying foreign taxes at a rate one-third higher than they paid in America.

It Affects All of Us

The study goes on to point out that the prevalence of these "corporate tax dodgers" means paying more for (or getting less of) government-funded projects. It means unfairness in corporate competition. It means struggling state governments.

And it means angry citizens who are upset and disillusioned by (not to mention downright angry with) their elected officials and the government these officials are entrusted to run.

So how was this possible? An obvious answer is the size of the tax code. SmartMoney recently noted that the U.S. tax code now contains more than four times the number of words that Shakespeare left behind across all of his works.


Yet it's full of loopholes -- loopholes that legally permit even a tech giant such as Apple to sidestep billions of dollars in taxes.

A recent article in The New York Times explained how Apple avoids state taxes in California by setting up additional corporate offices in Nevada (which has no state income tax).

It also pointed out an elaborate technique like the "Double Irish With a Dutch Sandwich" trick, whereby Apple sends profits through Irish subsidiaries to subsidiaries in the Netherlands to other subsidiaries in the Caribbean. This all lets Apple trim its U.S. federal tax bill.

A former Treasury economist calculated that, without these strategies, Apple's tax bill would have been $5.7 billion instead of the $3.3 billion it actually paid.

But Apple's not alone. Countless other companies employ similar methods. And it's completely legal.

Gallery: Fortune 500 Companies
gallery


What Can Be Done?

It's a vicious cycle, and will continue to be. As state governments and the federal government face growing deficits, it will become increasingly necessary to raise taxes.

Yet raising taxes will only force these companies to look even harder for ways to legally dodge these higher taxes, exacerbating the problem.

Corporations will continue to lobby for ever-lower taxes -- and politicians will continue to cower to their demands, so these companies will fund their next reelection campaign.

However you look at it, our tax system is in desperate need of fixing, and we need our elected officials to work together to fix it. But at more than just the individual level.

This article was written by Motley Fool analyst Adam J. Wiederman. Click here to read Adam's free report on how to boost your Social Security checks by as much as 76%.

The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple, ExxonMobil, and Goldman Sachs, as well as creating a bull call spread position in Apple
.


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codypic

Although Tax loopholes (otherwise know as legal deductions) should be adjusted and more should be done
to collect what is more correct for these large corporations. There was a lot left out from the other side of the story.. but not getting into those details,, I would just add,, why are we not collecting anything; in fact giving refunds to people who actually paid nothing from the bottom 50 % of the country. Even at small amounts for
each,, that is a whopping lot of money.

May 24 2012 at 11:31 AM Report abuse +1 rate up rate down Reply
1 reply to codypic's comment
Candice

You want to tax the bottom but not the top? typical republican response.

May 29 2012 at 11:23 AM Report abuse rate up rate down Reply
Jonatha

Actually...itis NOT widely known that Buffet pays a smaller percentage than his secretary, becuase that has been THOROUGHLY debunked.

Also...the reason why some rich people pay such a low tax rate is becuase they make their money with risky investments. The lower tax rate for investments was PURPOSELY set up to encourage those who could afford it to invest in the economy.

Someone who invests $1 million and makes a $100,000 prift, paying, say 15% in taxes on that $100,0000 is contributing to society FAR more than someone who makes $100,000 as a salaries employee and pays $25,000 in taxes.

May 10 2012 at 5:51 AM Report abuse +1 rate up rate down Reply
1 reply to Jonatha's comment
Candice

That is just the point they are not investing anything in this country that is the lie the republicans are telling.

May 29 2012 at 11:26 AM Report abuse rate up rate down Reply
capenv

How much does Honda, Toyota and Hyundai pay in taxes? Try nothing! Purchase from American companies when possible and support America.

May 09 2012 at 11:29 PM Report abuse +1 rate up rate down Reply
chris1011

democracks0, imalibnow2, n7monthsocrapleft .. you guys are on here 24/7 complaining about how tough things are and blaming the current president for your personal problems. Know why? Because when the market crashed in '09, you panicked and sold, at the bottom! Lost half your paltry worth in that clever move, didn'tcha!!! Now you're looking longingly at the market that has more than doubled and realized that you missed out.
Know why I'm upbeat on the current state of things? I bought what you sold, and have been collecting the dividends accordingly. I've made more money under Obam than I ever made under the last one.

May 09 2012 at 12:30 PM Report abuse -4 rate up rate down Reply
1 reply to chris1011's comment
chris1011

Why don't you and loser mrspelos get a room and have at it. You know you want to.

May 09 2012 at 3:54 PM Report abuse -2 rate up rate down Reply
Smart Mind

Do want the number so you can call yourself for the job?
http://urfundamast.blogspot.com/

May 09 2012 at 9:08 AM Report abuse rate up rate down Reply
ha6ai

Enough lefty propaganda already!

Its OK for corporations to legally not pay taxes at all. Its often as a result of inducements to make certain investments in research, plants and equipment. Anyway, its double-taxation. Their stockholders - you and I - pay taxes on dividends and stock profits from stock sales.

AOL/HuffPuff need to stop all the Obama/commie "articles".

May 09 2012 at 1:13 AM Report abuse +2 rate up rate down Reply
chris1011

Teabaggers HATE facts. Just look at the posts below! And that is a fact.

May 08 2012 at 9:39 PM Report abuse -5 rate up rate down Reply
1 reply to chris1011's comment
democracks0

Only Chris posts facts. The liberal expert on everyyyyyyyyyyyyyyyyyyything.

May 08 2012 at 9:41 PM Report abuse +4 rate up rate down Reply
chris1011

Starting around 1980, the Republican Party has been increasingly about propaganda and decreasingly about substance. Republicans were worthy of reasonable respect prior to 1980. From 1980-2000 the Republican Party started shedding substance in favor of propaganda. Since 2000, there has been no Republican Party in the Eisenhower sense. As just one symptom (and strong signal) of their near-total reliance upon propaganda, the GOP has forced themselves into the position now rejecting science. Science keeps contradicting many of the GOP's propaganda positions, so therefore science must be rejected.

May 08 2012 at 9:34 PM Report abuse -3 rate up rate down Reply
2 replies to chris1011's comment
democracks0

Do want the number so you can call yourself for the job?

May 08 2012 at 9:36 PM Report abuse +2 rate up rate down Reply
chris1011

Denial is a b!tch, isn't it.

May 08 2012 at 9:40 PM Report abuse -3 rate up rate down Reply
chris1011

From the Wall Street Journal:

President George W. Bush entered office in 2001 just as a recession was starting, and was preparing to leave in the middle of a long one. That’s almost 22 months of recession during his 96 months in office.

His job-creation record won’t look much better. The Bush administration created about three million jobs (net) over its eight years, a fraction of the 23 million jobs created under President Bill Clinton‘s administration and only slightly better than President George H.W. Bush did in his four years in office.

Because the size of the economy and labor force varies, we calculated in percentage terms how much the total payroll count expanded under each president. Under President Bush, once taking account how long he’s been in office, shows the worst track record for job creation since the government began keeping records.

Wall Street Journal

May 08 2012 at 9:31 PM Report abuse -4 rate up rate down Reply
2 replies to chris1011's comment
democracks0

Copy and paste copy and paste. How about I call MSNBC and ask for the job for you. I know you have to be tired of all this auditioning.

May 08 2012 at 9:33 PM Report abuse +4 rate up rate down Reply
chris1011

Denial is a b!tch, isn't it.

May 08 2012 at 9:40 PM Report abuse -4 rate up rate down Reply
1 reply to chris1011's comment
democracks0

Aww don't be so hard on yourself. One day you'll get things right.

May 08 2012 at 9:42 PM Report abuse +2 rate up rate down
chris1011

Since John F. Kennedy was elected president in 1961, job growth under Democratic presidents has outnumbered that under Republicans by a nearly 2-to-1 margin, according to a Bloomberg Government analysis. During that period, non-government payrolls grew by almost 42 million jobs under Democratic presidents, compared to 24 million when a Republican party member was in power.

The pattern seems to be holding true under President Obama. During the first three years and two months of his presidency, the country hasn't lost nearly as many jobs as during that same first period of his predecessor. In April, the total number of private sector jobs finally surpassed that which existed when Obama took office in January 2009, according to the Bloomberg Government report.

Obama's re-election is far from guaranteed. No U.S. president has won re-election since World War II with an unemployment rate above 6 percent on Election Day, with the sole exception of Ronald Reagan, who faced a jobless rate of 7.2 percent on Election Day 1984, according to a separate Bloomberg report.

May 08 2012 at 9:24 PM Report abuse -4 rate up rate down Reply
2 replies to chris1011's comment
democracks0

ZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZ Yawn. I think I'll go on the interent and see what I can copy and paste and then post it.

May 08 2012 at 9:27 PM Report abuse +3 rate up rate down Reply
2 replies to democracks0's comment
chris1011

Your TeaTalibangelical head is exploding, and it's still a couple months until 4th of July.

May 08 2012 at 9:37 PM Report abuse -2 rate up rate down
democracks0

Awwww are you upset now Chrissy. Now his true colors start to show. Out the window with the liberal compassion and tolerance. LOL.

May 08 2012 at 9:39 PM Report abuse +2 rate up rate down
democracks0

*internet

May 08 2012 at 9:29 PM Report abuse +1 rate up rate down Reply