The AP reported that Most Companies Escape Paying Federal Income Taxes. While I am sure that technically they are correct, they are also ENTIRELY misleading. Of course the majority of corporations didn't pay federal income taxes - the majority of corporations are not required to.
This is a simple case of "creating" news where there isn't any. Let me explain:
Basically there are 3 forms in which a corporation does business (I know I'm leaving out many forms, but I'm using the ones from the article): C-Corporation, S-Corporation and Limited Liability Company. When a corporation is formed, they choose which form they wish to be.
The C-Coroporation (examples are publically traded companies) requires that all profit is taxed to the corporation. The corporation is required to pay 'income taxes.'
The S-Corporation and the Limited Liability Company (examples are most small businesses) are elections made by the corporation in which profits are not taxed to the corporation. Instead the profit is recorded on the personal tax returns of the owners and the owners pay the income tax.
This alarmist "news" is a warm pile of crap. It conveniently avoids the fact that taxes are indeed paid - by the owners of the corporation rather than the corporation itself. Of course the majority of corporations do not pay federal income tax - 59% (2002) of all corporations are S-Corporations. This doesn't even count the Limited Liability Companies.
Beware of lazy and misleading journalism - it should be called what it is - CRAP!
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