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If you thought Romney's taxes were low, wait until you see what companies pay

Mitt Romney's tax return ruffled some feathers when it showed that the would-be GOP presidential candidate paid about 15 percent in taxes last year. As it turns out, Romney paid more in taxes than the average American corporation in 2011.

According to new data from the Congressional Budget Office, as reported in the Wall Street Journal Friday, U.S.-based companies paid only 12.1 percent in taxes on profits earned domestically. This is the lowest rate in four decades, and it's forcing budget forecasters to increase their deficit projections for the coming years. 

On average, companies paid nearly 26 percent in taxes between 1987 and 2008. In theory, the top federal corporate tax rate is 35 percent, but in practice, it's clear that companies have found ways to lighten that tax burden. Last year, companies paid a total of $181 billion in taxes. Individuals, on the other hand, kicked in $1.1 trillion. That's still not enough to bridge the widening gap between what the government takes in and what it spends. The CBO had to increase its deficit projection for this year by nearly $227 billion.

The Wall Street Journal fingers a recession-induced tax break as the culprit. While recessions generally lead to less money flowing into government coffers, this tax break is holding those tax receipts down even though many businesses today are awash in cash. Called "bonus depreciation," the tax break in question lets companies take big write-downs on purchases of machines, hardware and other equipment. Normally, corporations have to spread these write-downs out over a period of several years, but bonus depreciation lets them take it all up-front.

Over the past two years, bonus depreciation saved American companies a combined $110 billion. For 2012, the amount businesses can write off this way is cut in half, but some in Washington are pushing for this tax cut to be extended, as are business trade groups. They argue that the net impact on the federal budget is small, since companies are just taking their deductions for depreciation in one fell swoop instead of a little at a time.

But this revenue shortfall comes while anxiety about government debt and soaring deficits is high, and while the nation's credit rating is under increased scrutiny. The Urban-Brookings Tax Policy Center points out that temporary periods of bonus depreciation have been used before to stimulate economic growth, but that the effect of this tactic is blunted if companies come to expect it or anticipate repeated extensions.