The businesses that sponsor your local little league team and pour your morning coffee may end up paying higher tax rates than some of America’s largest, most profitable corporations, a new study suggests.
When tax credits and deductions are included, two of the most common types of small businesses pay a percentage on their income to the government more than double that of large corporations, the study commissioned by the National Federation of Independent Businesses and the S Corporation Association found. That's because those types of businesses -- known as S corporations and partnerships -- pay taxes at the individual rate, rather than as a corporate entity, making them ineligible for certain tax benefits, according to The Hill.
The result is an average corporate tax rate of just 12.6 percent, according to Government Accountability Office. That's compared to the 31.6 percent and 29.4 percent that S corporations and partnerships pay respectively, according to the study.
The findings come as many of America’s biggest businesses face criticism for avoiding their fair share in taxes. Many corporations, including Apple, Google and Amazon, wind up paying less than the top Federal tax rate of 35 percent, in part because they report international revenues in countries with lower tax rates, known as tax havens. Some companies, such as General Electric have been known to pay negative tax rates, meaning they actually gain money from paying taxes due to federal tax subsidies and other tax benefits.
Meanwhile, recent calls by President Obama to reform the corporate tax code have been criticized by small business owners who say such efforts would only further reduce the burden paid by corporations while doing nothing for businesses who are taxed at the individual rate.
(Hat Tip: The Hill.)
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