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 Most of America’s biggest and most powerful businesses, from Apple
Inc to Wal-Mart Stores Inc, are C corporations.
The profits of C corporations, which are taxed separately from their
owners, have soared since the 1980s, though the sheer numbers of
these businesses have declined and their proportional contribution
to federal tax revenues has slipped.
New Internal Revenue Service data shows that the agency received 1.6
million income tax returns from C corporations in 2012, the latest
year available, down from 2.1 million in 2002.
The debate in Congress on tax reform, which will resume on Sept. 8
when Congress reconvenes, is expected to focus heavily on the
comparatively small and shrinking slice of the U.S. tax revenue pie
that is paid by C corporations.
Democrats and Republicans concur that the income tax rate paid by C
corporations is too high and should be reduced, though they disagree
on how far to cut it.
 The tax-writing Ways and Means Committee of the House of
Representatives on Thursday said in a statement its top priority in
months ahead will be "international tax reform," an issue that
directly affects the profits of C corporations.
The Republican-controlled panel said that means it will weigh
proposals such as giving C corporations a tax break on foreign
profits; taking steps to halt C corporations from reincorporating
abroad to cut U.S. taxes, and giving C corporations a tax break on
intellectual property profits.
The focus of Congress on C corporations reflects the ability of
their well-paid lobbyists to capture and hold Washington's
attention.
Today, the vast bulk of federal revenue comes from the individual
income tax, social insurance tax and other taxes.
The U.S. government still gets from 7 percent to 14 percent of its
revenue from the corporate income tax, depending on the economy's
health and corporate profits. In the 1960s and 1970s, that range was
14 percent to 23 percent.
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Meanwhile, while the number of C corporations has been going down,
the number of so-called S corporations has been going up, partially
because company owners using that designation can avoid paying a
corporate tax, according to researcher Steven Rosenthal at the
Urban-Brookings Tax Policy Center.
In 2012, the IRS received 4.2 million returns from S corporations,
up from 3.2 million a decade ago. S corporations, which pay no
income taxes themselves, pass profits directly from the company to
the owners, who pay an individual income tax on those profits.
The number of limited liability companies, sole proprietorships and
other business structures, has also surged. They do not pay
corporate income tax, either.
No mention was made in the Ways and Means Committee's statement of
reducing taxes on ordinary wage earners and owners of S corporations
and other so-called pass-through businesses.
Kyle Pomerleau, economist for the Tax Foundation's Center for
Federal Tax Policy, said the two political parties disagree on
individual tax code reforms more than on corporate reforms.
"How are you going to capture pass-through income correctly?"
Pomerleau said. "It's not clear to me whether anyone has come up
with a good solution for that."
(Editing by Kevin Drawbaugh and Steve Orlofsky)
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