Tax Foundation Study: Corporate Exemptions “Generally Available” to All Industries

A new report by Washington D.C.-based think tank Tax Foundation suggests that most corporate tax exemptions in the US apply to all businesses, dispelling the prevailing thought that they target specific industries.

The study found that only about 8% of corporate tax expenditure benefits are targeted to specific business areas, such as renewable energy, insurance, oil and gas, and coal. Contrary to popular opinion, the vast majority of exemptions can be availed by nearly all corporations as part of their cost-cutting arsenal.

Tax Foundation President Scott A. Hodge says the report compares the various corporate income tax expenditures with popular exemptions for individuals and state and local governments. Most of the corporate tax exemptions were enacted for the benefit of specific policy goals defined by lawmakers, rather than favoring a particular industry.

The report further found that benefits for state and local governments were nearly twice the amount for specific industries. For instance, state and local governments enjoy up to $640 billion in tax benefits, through the combination of the deductions for state and local income and property taxes, as well as exemptions for state and local bonds.

However, the benefits for individuals far outweigh corporate tax expenditures, such as the exclusion for employer-provided health insurance and the mortgage interest deduction for homeowners.

There are roughly 80 different corporate tax expenditures, amounting to nearly $660 billion over fiscal years 2012 to 2016. In addition, the five-year budgetary cost of the exclusion for employer-provided health insurance for individuals exceeds $1 trillion, while the mortgage interest deduction amounts to over $609 billion for the housing industry.

“With the mounting federal deficits, corporate tax expenditures have come under increased scrutiny as a potential source of new tax revenues,” Hodge said. “However, considering the fact the US 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.”

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