Most corporate tax exemptions, contrary to political rhetoric, are generally available to all businesses, not just to particular “special interests,” according to a new analysis by the Tax Foundation.
Provisions within the Tax Code often derided as “loopholes” are generally enacted to achieve specific policy goals defined by lawmakers, not just to favor one particular business or industry.
In the new study, “Who Benefits from Tax 'Loopholes?,” Tax Foundation president Scott A. Hodge puts the various corporate income tax expenditures into perspective and compares them with other popular exemptions that benefit individuals and state and local governments.
“With the mounting federal deficits, corporate tax expenditures have come under increased scrutiny as a potential source of new tax revenues,” Hodge said in a statement. “However, considering the fact the U.S. has one of the highest corporate tax rates in the world, lawmakers would be far wiser to consider reducing or eliminating them within the broader context of corporate tax reform and lowering the federal corporate tax rate.”
Contrary to popular opinion, only about 8 percent of corporate tax expenditure benefits are targeted to specific industries such as renewable energy, insurance, oil and gas, and coal. Instead, the benefits received by state and local governments are nearly twice the amount targeted to specific industries. The vast majority of tax expenditures are largely available to all corporations and industries.
Total estimated corporate tax expenditures, for example, are dwarfed by the benefits conferred on individuals, such as the exclusion for employer-provided health insurance for individuals and the mortgage interest deduction for homeowners.
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