How corporations avoid paying income taxes

With all the talk about how companies like General Electric and Cisco pay no or very low U.S. taxes, reader Hal Helfan of Oakland wants to know why can’t there be an alternative minimum tax for corporations like there is for individuals, to make sure that companies can’t use loopholes to wipe out their tax burden.

“If the AMT rate were set appropriately, it would probably be easier to lower the corporate tax rate and would definitely be a boon to small corporations that don’t get much benefit from tax credits,” he writes.

In fact there is a corporate AMT, and it works very much like the individual AMT.

Corporations figure their tax under the regular system, which taxes corporate profits at a top rate of 35 percent. Then they figure it under the AMT system, which tosses out some deductions allowed under the regular system, and taxes the resulting profit at 20 percent. The corporation then pays whichever tax is higher.

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