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Feb
2014
28

Uncle Scam: Since 2008, At Least 22% of Fortune 500 Companies Have Had Tax-Free Years

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A recent study from Citizens for Tax Justice (CTJ) looked into the corporate taxes paid (or not paid) by Fortune 500 companies over the past five years. The results show a clear trend of tax avoidance that hinders the growth of the U.S. economy.  

Looking at 288 profitable Fortune 500 companies, the study found 26 which paid no corporate taxes over the entire period.  Claims from right-wing business interests that corporate taxes are too high are incorrect according to CTJ. In reality, loopholes must be further closed or certain companies will never pay any taxes at all.   

Among the report’s key findings are:

• 111 of the companies enjoyed at least one year in which their federal income tax was zero or less.
• 26 companies, including Boeing, General Electric, Priceline.com and Verizon, enjoyed negative income tax rates over the entire five-year period, despite combined pre-tax profits of $170 billion.
• Of the 125 multinational companies in this sample, two-thirds paid a lower U.S. tax rate than the rate they paid to foreign governments on their foreign profits. On average, their foreign effective tax rate was 12 percent larger than their U.S. effective rate.
• The total amount of federal income tax subsidies enjoyed by the 288 profitable corporations over the five years was $362 billion.
• Wells Fargo tops the list of corporations receiving the most in tax subsidies, getting more than $21 billion in tax breaks from the U.S. treasury from 2008 through 2012.
• Pepco Holdings had the lowest effective tax rate of all the companies in the study, at negative 33 percent over the five year period.
• Industry tax rates varied widely, from a low of 2.9 percent for utilities to a high of 29.6 percent for healthcare companies.
• Some companies within sectors fare worse than others. For example Time Warner Cable paid 3.9 percent over five years, while its competitor Comcast paid 24 percent.
• More than half of the federal corporate tax subsidies received by companies in the study went to four industries: financial services, utilities, telecommunications, and oil, gas and pipelines.

The report’s lead author, Robert McIntyre, notes the hypocrisy of corporations demanding lower taxes:

“It’s a sorry situation when most Americans can rightly say, ‘I pay more in federal income taxes than General Electric, Boeing, Verizon, Pepco, Priceline, Duke Energy and 20 other big corporations, all put together!’

Globally speaking, the U.S. is where corporate taxes go to die:

“Corporate lobbyists incessantly claim that our corporate tax rate is too high, and that it’s not ‘competitive’ with the rest of the world.  Our new report shows that both of these claims are false. Most of the biggest companies aren’t paying anywhere near 35 percent of their profits in taxes and far too many aren’t paying U.S. taxes at all. Most multinationals are paying lower tax rates here in the United States than they pay on their foreign operations.”

The report recommends the following reforms to create a fair playing field:

• Congress should repeal the rule allowing American multinational corporations to indefinitely “defer” their U.S. taxes on their offshore profits. This reform would effectively remove the tax incentive to shift profits and jobs overseas.

• Limit the ability of tech and other companies to use executive stock options to reduce their taxes by generating phantom “costs” these companies never actually incur.

• Having allowed “bonus depreciation” to expire at the end of 2013, Congress could take the next step and repeal the rest of accelerated depreciation, too.

• Reinstate a strong corporate Alternative Minimum Tax that really does the job it was originally designed to do.

• Require more complete and transparent geography-specific public disclosure of corporate income and tax payments than the Securities and Exchange Commission’s regulations currently mandate.

Corporate tax-dodging is certainly not a new phenomenon.  Yet, as the United States continues to shake off the dust from the economic recession the time is now to promote a cultural change through policy that will allow America to thrive and lessen the constraints placed on federal and state budgets due to loss of revenue through tax avoidance.

Read the “Sorry State of Corporate Taxes” in its entirety.

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