With the highest corporate tax rate in the world, American companies are already at a major disadvantage when they try to compete with foreign competitors. But thanks to loopholes inserted into the tax code by members of Congress in hock to corporate lobbyists, the profits of at least one big American firm is being taxed at a rate ten times the rate .
“Just how broken is the corporate tax system?” asks Paul Caron of TaxProf Blog. “Consider the tax rate paid by two of America's biggest companies — Wal-Mart and General Electric. Wal-Mart paid 34 cents in taxes for every dollar of profit it made in the past three years. General Electric paid just 3.6 cents on the dollar.
“Welcome to the mysterious world of the corporate income tax, says tax expert Len Burman at Syracuse University. ‘There are big companies that consider their tax departments to be profit centers,’ he says.
“That's right; instead of concentrating on making light bulbs, power plants or whatnot, companies use the tax system to boost their profits.”
The inevitable distortions that occur when companies spend time, energy and resources gaming the tax system instead of boosting productivity and creating jobs is another government-imposed drag on the U.S. economy.