A new study has found that at least 55 of America’s largest companies paid zero taxes last year, despite making billions of dollars in profits. It’s infuriating.
As the New York Times reports, that 2017 tax bill eagerly passed by Republicans in Congress and signed with great fanfare by the former guy, reduced the corporate tax rate to 21 percent from 35 percent. On top of that gift,
dozens of Fortune 500 companies were able to further shrink their tax bill — sometimes to zero — thanks to a range of legal deductions and exemptions that have become staples of the tax code, according to the analysis…
Twenty-six of the companies listed, including FedEx, Duke Energy and Nike, were able to avoid paying any federal income tax for the last three years even though they reported a combined income of $77 billion. Many also received millions of dollars in tax rebates.
As Bernie Sanders has reportedly noted, if you paid 135 for a pair of Nike shoes, you paid more for them than Nike paid in taxes.
The Times article has a list of the most profitable companies that paid no taxes last year.
Publicly traded corporations have to file financial reports, and those reports include the amounts they’ve paid in federal income taxes. When challenged about their ability to avoid paying taxes, most respond that they “fully comply” with the laws. Which is undoubtedly true. (Okay, maybe not for those with accounts in offshore tax havens…Although that tactic is more common among filthy rich individuals than corporations…)
It’s relatively simply to “fully comply” with tax provisions (aka “loopholes”) that are intended to encourage socially useful behaviors like investing in clean energy or modernizing aging equipment.
The $2.2 trillion CARES Act, passed last year to help businesses and families survive the economic devastation wrought by the pandemic, included a provision that temporarily allowed businesses to use losses in 2020 to offset profits earned in previous years, according to the institute.
Several of these deductions and credits are justifiable. Others, much less so.
I agree with Elizabeth Warren, who has been quoted as saying that giant corporations with billions of dollars of profit shouldn’t be able to pay $0 in federal taxes. According to the Times, today’s tax avoidance strategies include a mix of old standards and what the report calls “new innovations”. It’s hard to argue, for example, for the social benefit of allowing companies to save billions of dollars by characterizing the purchase of discounted stock options by their top executives as a loss, which they then deduct.
The Biden administration announced this week that it planned to increase the corporate tax rate to 28 percent, and establish a kind of minimum tax that would limit the number of zero-payers. The White House estimated that the revisions would raise $2 trillion over 15 years, which will be used to fund the president’s ambitious infrastructure plan.
Supporters say that in addition to yielding revenue, the rewrite would help make the tax code more equitable, requiring individuals and companies at the top of the income ladder to pay more. But Republicans have signaled that the tax increases in the Biden proposal — which Senator Mitch McConnell of Kentucky, the minority leader, called “massive” — will preclude bipartisan support.
Individual taxpayers have long had to contend with the Alternative Minimum Tax. That provision was created in the 1960s, with the goal of preventing high-income taxpayers from using various deductions and credits to avoid the individual income tax. There’s no reason why a similar mechanism shouldn’t apply to corporate giants using provisions of the tax code to avoid paying any taxes on massive profits.
Meanwhile, It would be illuminating if a Congressional committee were to examine the credits and deductions allowed by the current tax code, and eliminate those that no longer make much sense. (Some never did.)
If nothing else, it would be interesting to see how the Republican supporters of these provisions would defend them.