Taxes? What taxes?
November 27, 2007
In its latest edition, Business Week has published a list of 50 companies that paid the least corporate taxes over a five-year period as part of an article on the impact of proposed reforms to corporate taxation. Maryland had only one company on the list — in the top 10 no less: Bethesda-based private equity firm American Capital Strategies.
The company, which has a piece, in part or in whole, of companies like Piper Cub, Rug Doctor and football helmet maker Riddell, had an effective tax rate of 1.8 percent. That put it eighth on Business Week’s list.
According to Business Week: … “because it’s a Regulated Investment Company under IRS rules, it owes no federal income taxes so long as it distributes most of its taxable income and capital gains to shareholders. The short version: the company paid very little to Uncle Sam while distributing $454 million in dividends to shareholders.”
Just because American Capital had a low tax rate, should it be a leading example of why the country needs corporate tax reform, or is it a prime example of how a free market should work?
-BEN MOOK, Assistant Business Editor
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The “justification” for American Capital’s small tax rate on it’s income is that because it distributes that income to shareholders, Uncle Sam takes his cut from them- at the ordinary income tax rate- up to 35%.