Newspaper article THE JOURNAL RECORD

Study: Largest Corporations Suffer under New Tax Code

Newspaper article THE JOURNAL RECORD

Study: Largest Corporations Suffer under New Tax Code

Article excerpt

WASHINGTON (AP) - The new federal income tax overhaul will raise effective rates on the largest corporations by about 20 percent but one-third of the profitable companies that have been able to avoid taxes altogether will continue to do so, an analysis disclosed Thursday.

``The 1986 Tax Reform Act is a step in the right direction but it is not the end of the road,'' Thomas F. Field, head of Tax Analysts, a non-partisan research organization, told reporters in releasing the study.

The analysis concluded that the new law, when all provisions become effective in 1988, will narrow considerably the gap between the highest- and lowest-taxed corporations. Had the law been in effect in 1985, the study found, the effective tax rate on the U.S. income of the 1,000 largest profitable companies would have been 25.65 percent, rather than the 20.91 percent estimated for those corporations under the old law.

``However, even if the ... act ... had been in effect in 1985, 35 profitable firms would, nevertheless, have paid no federal corporate income tax,'' the analysts found. ``This compares with 94 firms in the top 1,000 that actually had negative effective federal tax rates,'' meaning they paid no tax last year and qualified for refunds of previous years' liabilities.

``The 1986 Tax Reform Act thus seems likely to reduce the problem of profitable firms that pay no tax, without eliminating it,'' the study concluded.

The study found that the new law will result in considerably more companies being taxed in the range of 20 percent to 30 percent. The maximum rate for corporations in the new law is 34 percent, compared with 46 percent under present law.

In addition, Field said, 65 corporations that showed a profit in 1985 would have been taxed at effective rates of less than 10 percent had the new law been in effect. …

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