There is a wide variation among industries in the share of income paid in federal taxes, as I noted in an article this morning about the president’s call for an overhaul of the corporate tax code. The article includes a few examples, but the longer list of industries and effective tax rates also makes for fascinating reading.
Earlier today, my colleague Catherine Rampell looked at the variation in effective tax rates among some major companies. Here are the disparities more broadly among 20 of the largest industrial sectors:The a
nalysis was provided by Aswath Damodaran, a finance professor at New York University, who used a database of financial information for 5,928 public companies. He derived the effective tax rate for each industrial sector by dividing the aggregate reported net income by the aggregate taxable income.
A fuller chart shows Mr. Damodaran’s latest data comparing a variety of industry fundamentals, along with other data sets back to 1999.
There are some striking patterns. High-tech industries pay relatively little in taxes. Utilities and other infrastructure providers pay some of the highest rates.
There are also extreme variations within industrial sectors, as between petroleum producers and integrated petroleum companies.
Interestingly, Mr. Damodaran says much of the difference is a question of life cycle. Young industries tend to be plowing more of their revenues into research and equipment and other kinds of spending that the government rewards with tax breaks. Economists debate whether those breaks actually encourage investment, or simply reward companies for doing what they would do anyway, but one result is clear – those young and growing industries pay taxes at lower rates.
What strikes you about the differences in the data?
Earlier today, my colleague Catherine Rampell looked at the variation in effective tax rates among some major companies. Here are the disparities more broadly among 20 of the largest industrial sectors:The a
nalysis was provided by Aswath Damodaran, a finance professor at New York University, who used a database of financial information for 5,928 public companies. He derived the effective tax rate for each industrial sector by dividing the aggregate reported net income by the aggregate taxable income.
A fuller chart shows Mr. Damodaran’s latest data comparing a variety of industry fundamentals, along with other data sets back to 1999.
There are some striking patterns. High-tech industries pay relatively little in taxes. Utilities and other infrastructure providers pay some of the highest rates.
There are also extreme variations within industrial sectors, as between petroleum producers and integrated petroleum companies.
Interestingly, Mr. Damodaran says much of the difference is a question of life cycle. Young industries tend to be plowing more of their revenues into research and equipment and other kinds of spending that the government rewards with tax breaks. Economists debate whether those breaks actually encourage investment, or simply reward companies for doing what they would do anyway, but one result is clear – those young and growing industries pay taxes at lower rates.
What strikes you about the differences in the data?
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