Charlotte Observer: Big companies with big profits pay little in taxes, study finds
media mentionBy Kirsten Valle Pittman
[email protected]
Posted: Friday, Nov. 04, 2011
Major U.S. companies – including a big bank, an energy titan and a manufacturer with close Charlotte ties – are paying unusually low taxes to the federal government, a study released Thursday found.
The report from two left-leaning think tanks, Citizens for Tax Justice and the Institute on Taxation and Economic Policy, studied the federal income taxes of Fortune 500 corporations that were profitable between 2008 and 2010.
It found those 280 companies paid, on average, about half of the top corporate tax rate of 35 percent in those years, despite combined pretax U.S. profits of $1.4 trillion.
While about one-fourth of the companies paid more than 30 percent over the three-year period, almost the same number paid less than 10 percent, the study found. Thirty companies employed so many loopholes and tax breaks that they had no federal tax liability from 2008 to 2010, the Washington, D.C.-based organizations found.
Wells Fargo & Co., the San Francisco bank that bought Charlotte’s Wachovia, and Charlotte-based Duke Energy Corp. were among the 30 firms to pay no federal income taxes over the course of the study, the report said.
Charlotte manufacturer SPX Corp. was one of the 78 companies paying zero taxes in at least one of the years. It also was on the list of firms that paid less than 10 percent overall.
The study’s authors argued in the report that their results show corporate tax loopholes are “out of control.”
“Just as workers pay their fair share of taxes on their earnings, so should successful businesses pay their fair share on their success,” they said.
But some companies disputed the findings, saying the study omitted deferred taxes they might pay in future years or ignored the reasons for low tax rates, including efforts to create jobs and deliver return to shareholders.
Wells tops in tax breaks
“This report takes data out of context to advance an agenda,” Wells Fargo officials said in a statement. “The truth is that over the past 10 years, Wells Fargo has paid more than $30 billion in income taxes to federal and state authorities and billions more in other taxes, and it fulfills all tax obligations.”
Among the 280 companies, Wells Fargo racked up the most in tax breaks from 2008 to 2010, nearly $18 billion, the report said. Its overall tax rate was minus 1.4 percent on more than $49 billion in total profits for the three years studied.
But the bank said those years were unusual, because Wells Fargo bought Wachovia in 2008. That resulted in significant losses and reduced Wells’ taxable income.
“A substantial portion of the Wachovia losses had been realized by the end of 2010, and based on results for the first three quarters of 2011, Wells Fargo expects to pay significant income taxes for 2011,” the bank’s statement said.
Duke Energy was one of the study’s top 25 companies in terms of corporate tax breaks, too. The utility’s three-year tax rate was a minus 3.9 percent on profits of nearly $5.5 billion, the study found.
Wells, Duke: We pay our due
Company spokesman Tom Williams said Duke’s tax rate was lowered by bonus depreciation, which allows a company to deduct a higher percentage of capital purchase costs in the first year, among other factors.
Duke is a “hugely capital intensive business” – it has built four new power plants that will come online next year, for instance – and like other companies, has taken advantage of related tax breaks the government offers, he said.
Duke wasn’t alone in the tax study: Most utilities had low tax rates, cited as one of the report’s “low-tax industries.”
Williams added that bonus depreciation is designed to create jobs, “and our capital projects did create thousands of jobs.”
SPX, the Charlotte-based manufacturer that provides equipment for food and beverage, electricity and vehicle services, paid a federal tax rate of 6.2 percent on nearly $566 million in profits during the three-year period, the study found. Company representatives could not be reached for comment Thursday.
Thursday’s report comes as corporations push Congress for a cut in their official tax rate, arguing it would make them more competitive with companies overseas, and as lawmakers consider proposals to simplify the tax system.
The study was based on data from companies’ regulatory filings and does not include deferred taxes.