New Study: Corporate Tax Avoidance Remains Widespread Under Trump Tax Law

Contact: Jon Whiten ([email protected])

The tax overhaul signed into law by former President Donald Trump in 2017 cut the federal corporate income tax rate from 35 percent to 21 percent, but during the first five years it has been in effect, most profitable corporations paid considerably less than that. The details are explored in a new in-depth study from the Institute on Taxation and Economic Policy, which analyzes federal corporate income taxes paid by 342 large corporations that were profitable in each year from 2018 through 2022.

Among other things, the study finds:

• The 342 companies included in this study paid an average effective income tax rate of just 14.1 percent during this five-year period, almost a third less than the statutory rate of 21 percent.
• Of these, 87 paid effective tax rates in the single digits or less, and 55 paid less than 5 percent. This is particularly striking given that all these companies were profitable for at least five years consecutively. Companies paying less than 5 percent include T-Mobile, DISH Network, Netflix, General Motors, AT&T, Bank of America, Citigroup, FedEx, Molson Coors, Nike, and many others.
• Twenty-three corporations paid zero federal tax over the five-year period despite being profitable in every single year. And 109 corporations paid zero federal tax in at least one of the five years.
• In all, these 342 corporations received $275 billion in tax subsidies from 2018 through 2022; just 25 corporations claimed $155 billion of those total tax breaks.
• Many of these corporations could ultimately pay even less, under a House-passed bill that repeals a tax increase related to research and development that took effect in 2022. We identify 82 corporations that could receive an additional $34 billion in tax breaks if the House-passed bill becomes law.

“For many of the biggest corporations in America, our 21 percent tax rate is an accounting fiction,” said ITEP Senior Fellow and lead author Matt Gardner. “Because of an array of special-interest tax breaks, the most profitable corporations in America routinely pay effective tax rates far below the legal rate.”

Corporate tax avoidance occurs because Congress allows it to occur, and the Trump tax law in some ways made it worse. The corporate minimum tax and expanded tax enforcement funding signed into law in 2022 by President Biden could begin to reduce corporate tax avoidance, as would other proposals from the White House that have not yet become law, like the global minimum tax negotiated by the Biden administration but currently blocked by Congress.

“Americans who heard President Trump and his supporters in Congress tout the 21 percent corporate income tax rate they enacted in 2017 may be alarmed to hear that so many corporations pay much less than that in reality,” said ITEP Federal Policy Director and co-author Steve Wamhoff. “But it does not have to be this way. Congress should take more steps to crack down on this widespread corporate tax avoidance.”

This ITEP study is our latest documenting corporate tax avoidance; we have been issuing similar reports for over 40 years. In recent years, an ITEP report finding that 55 large, profitable corporations avoided paying any federal corporate income taxes in 2020 was cited repeatedly by President Biden in arguing for the reforms that Congress eventually enacted as part of the Inflation Reduction Act. ITEP followed that with a report showing that even among corporations that were profitable each year for three years in a row, many paid little or nothing under the Trump tax law.

This study goes further, examining corporations that have been profitable each year for five years, 2018 through 2022, and still finds many that paid very little in federal income taxes under the 2017 law.

These latest findings demonstrate a major flaw with our tax system. Each of the companies included in this study were profitable for each of the five years and yet many did not pay a reasonable amount of taxes compared to their profits.

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