Now, the Tax Foundation researchers are smart enough to acknowledge this point-- but they're still leading with the "rates are too high" argument. And it's unfortunately only the "high rate" part of the argument that folks in Congress seem to have absorbed.
In an excellent New York Times article, Edmund Andrews presents both halves of the analysis:
But official tax rates are not the same as actual tax burdens. What American companies lose in high tax rates they more than make up in higher tax breaks...There are plenty of problems with the corporate tax code -- rococo complexity, perverse incentives, antique ideas -- but overly high taxes is not one of them.The recent short-term bump in federal corporate revenues (driven largely by higher corporate profits and federal tax deferrals that shifted tax collections from the first half of this decade to the second) shouldn't blind us to this underlying flaw in the corporate tax. It's OK to fight about whether the US corporate tax rate is somehow "too high." But anyone who makes this argument without confronting the loophole-driven low yield of this "high-rate" tax should be laughed out of the room.
For empirical evidence on how profitable Fortune 500 companies faced with a 35 percent federal corporate tax rate have managed to pay less than half of that in taxes, check out CTJ's fall 2004 report, Corporate Income Taxes in the Bush Years.