A report issued by Citizens for Tax Justice and the Institution on Taxation and Economic Policy suggest many of the largest U.S. corporations use loopholes and pay lobbyists to significantly reduce the amount of corporate income tax they pay.

The study suggests that inefficiencies of the tax code, using tax loopholes and lobbyist influence have reduced the amount of corporate tax they pay from 35% to 18.5%.

In coming up with their results, the two organizations looked at 280 companies in the Fortune 500 that were profitable for all three years between 2008 and 2010.

The results: 111 companies paid effective tax rates of less than 17.5% over the three-year period; 98 paid a rate between 17.5% and 30%; and 71 paid more than 30%.

The average rate? 18.5%.

Some companies paid zero. And 30 actually owed less than nothing in income taxes over the three years.

How does that happen?

At the root of the problem is a system of inverted incentives that encourages corporations to lobby for special tax breaks — and politicians to insert them into the tax code.

Corporations pay lobbyists. Lobbyists convince lawmakers to add tax breaks. Lawmakers modify the tax code.

The results of this study provide ammunition for an overhaul of the current tax code.

It’s time to seriously look at a flat income tax to fix the tax code inefficiencies.

source: money.cnn.com