How much tax do corporations pay?
In theory, their top tax rate is 35 percent — one of the highest in the world. In reality, most U.S. companies pay far less by exploiting tax breaks and loopholes. Of the 500 major companies in the S&P 500 stock index, 115 paid a tax rate of less than 20 percent over the past five years. Nearly 40 paid less than 10 percent. Boeing, for example, paid 4.5 percent in taxes on its profits over the past five years, Southwest Airlines paid 6.3 percent, and Yahoo paid 7 percent, according to research firm Capital IQ. General Electric, one of America's largest corporations, reportedly will pay little or no federal tax on its $14.2 billion in global profits for 2010.

Has it always been this way?
No. As a result of the loopholes and deductions added to the byzantine tax code in recent decades, corporations pay a far smaller share of total U.S. taxes than they once did. In the 1950s, Washington collected 30 percent of all its federal revenue from business taxes. Last year, it was just 9 percent. Individual taxpayers contribute far more revenue: $899 billion last year, compared with corporations' $191 billion. "It's unpatriotic, it's unfair, and we can't afford it," said Samuel Kang of the Greenlining Institute, which recently released a report on corporate tax avoidance. "Congress is looking to cut the deficit by slashing Medicare, Social Security, food safety, education, and health without collecting another dime from these wealthy companies."

How do businesses avoid paying the full tax?
Through a mix of deductions, accounting gimmicks, and tax shelters created by lobbyists and lawyers. One increasingly popular strategy is to shift jobs, operations, and profits to overseas subsidiaries in low-tax countries. It is estimated that U.S. companies have parked more than $1.5 trillion offshore in this way. Companies say they would be willing to bring these profits home and invest them in creating jobs if Washington would agree to a "repatriation holiday," a temporary period when the tax paid on the incoming money would drop from 35 percent to about 5 percent. But skeptics point out that during the last repatriation holiday, in 2004, 92 percent of the more than $300 billion that U.S. companies brought home went to stock buybacks and shareholder dividend payments, not to creating more jobs.

Are taxes lower abroad?
Yes. The U.S. federal corporate tax rate is the second highest in the world, behind only Japan. At least on paper, the U.S. rate is several times higher than in countries such as Ireland (12.5 percent), Germany (15.8 percent), and Canada (16.5 percent), not to mention zero-tax havens like Bermuda and the Cayman Islands. But in practice, loopholes allow most U.S. corporations to pay about the average of other industrialized countries—about 25 percent. "The effective tax rates that cor­porations pay actually go down a lot with deductions and put us closer to the middle of the pack," said Roberton Williams of the nonpartisan Tax Policy Center. And when measured as a percentage of GDP, corporate taxes are lower in the U.S. (2.1 percent) than in most of the 33 other countries in the Organization for Economic Co-operation and Development, such as Japan (2.4 percent), Canada (2.5 percent), and Korea (3.7 percent).

Why the call for reform?
Both liberals and conservatives believe the corporate tax code can be drastically revised and improved. "Whether the test is fairness or efficiency, the U.S. system gets really low marks," said MIT accounting professor Michelle Hanlon. American business leaders say the 35 percent tax rate hurts their competitiveness, forcing them to engage in nonproductive strategies to pay a lower rate, and rewarding them for moving business and hiring abroad. On the Left, critics argue that the federal government needs more revenue to reduce deficits, and that closing corporate tax loopholes is necessary. Those loopholes, critics say, will cost the government $102 billion in lost revenue this year alone.

What changes are possible?
President Obama's deficit-reduction commission recommended last year that the corporate tax rate be cut to as low as 23 percent, in conjunction with closing most loopholes. Business leaders generally support that idea. General Electric CEO Jeff Immelt, for example, said in a speech last week that his company would accept the elimination of loopholes "in a heartbeat" if the tax code were simplified and rates were reduced. "I'd take Germany's or Japan's or the U.K.'s corporate tax policy today, sight unseen,'' Immelt said. But because the politics surrounding the issue of tax reform remain highly polarized, it may take several years—and the end of the 2012 presidential election — before the code is actually revamped. "The ball has gotten rolling," says Caroline Harris, chief tax counsel for the U.S. Chamber of Commerce. "[But] if tax reform were easy, we would have already done it."

'The world's best tax law firm'
How does General Electric get away with paying little to no federal taxes? By employing a tax department of some 975 lawyers and accountants, often called the world's best tax law firm. Headed by John Samuels, a bow-tie-wearing former Treasury Department official, the tax department has more than tripled in size over the past two decades, all in the interest of reducing the company's tax bill. The department is widely admired for its artful accounting, crafted by the dozens of former IRS officials and former employees of congressional tax-writing committees that GE has hired. The company's defenders say it doesn't evade taxes; it simply finds legal tax breaks. Any complaints, they say, should be directed at the U.S. code, not the company. What's more, the company says, its tiny 2010 tax bill was a result of writing off $32 billion in losses incurred by its financial services division during the Wall Street meltdown. But GE also files tax returns in 250 global jurisdictions, many of them low-tax countries where profits are parked to avoid the U.S. taxman.