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The new data also suggest that shrinking effective corporate tax rates have helped boost corporate profits to record levels. Investors who have come to expect -- and in some cases even demand -- that corporations perform acts of tax diminution may be in for disappointment from here because, short of an act of Congress, it is hard to see how the corporate tax tally could get much smaller.
Corporate taxes have become a hot-button issue on the presidential campaign trial this year, fueled by a recent Government Accounting Office report that showed less than 40% of U.S. companies paid any federal taxes in each of the four years from 1996 to 2000 as well as a separate study showing that Internal Revenue Service audits have continued to drop under President Bush.
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Through the 1990s until the third quarter of 2001, according to the Commerce Department, the effective tax burden for all U.S. companies, public and private, was around 30%. But from the fourth-quarter of 2001 onward, companies have paid out just 20% of their profits in taxes. The Commerce Department's tax data often don't attract as much attention as some other measures of corporate taxation.
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Part of the drop in the corporate tax burden is the result of relief that Congress provided following Sept. 11, 2001, and again in May of last year. But not all of it. Take away the effects of these temporary tax-relief measures and, according to Commerce Department figures, the effective tax burden for the fourth quarter of last year rises from 20% to 24% -- still well below the 30% that prevailed during the 1990s.
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Write to Justin Lahart at justin.lahart@wsj.com
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