Memphis Commercial Appeal: Study on corporate tax ‘dodgers’ names Memphis-based FedEx, Int’l Paper
media mentionWASHINGTON — Memphis-based FedEx Corp. paid no corporate income taxes in 2008 and International Paper Co. paid none last year, according to a study by Citizens for Tax Justice and the Institute on Taxation and Economic Policy released Friday.
By Bartholomew Sullivan
Posted November 4, 2011 at 5:26 p.m., updated November 4, 2011 at 9:51 p.m.
FedEx crisis media relations spokesman Shea Leordeanu called the report “misleading and inaccurate,” saying accelerated depreciation deductions accounted for the anomaly.
International Paper attributed its low tax rate to a change in tax law permitting 100 percent expensing of capital spending and contributions to its employee pension plan.
The report, “Corporate Taxpayers and Corporate Tax Dodgers, 2008-2010,” follows the public interest group’s prior landmark studies of corporate taxation that have in the past led to substantial reforms.
Friday’s report indicates that while corporations are supposed to pay taxes of 35 percent of their incomes, the effective tax rate for the 280 companies examined over three years averaged less than half that amount: 17.3 percent.
It found 67 of those companies paid a less than 10 percent rate over that period and 30 paid less than zero.
The AFL-CIO and other groups embraced the report’s findings which come as the Joint Select Committee on Deficit Reduction approaches a Nov. 23 deadline to reduce the U.S. budget by $1.2 trillion over 10 years or face automatic spending cuts.
The report also makes the argument that huge public subsidies to some of the most profitable Fortune 500 companies are both unnecessary in spurring the economy and bad and unfair public policy.
It notes that corporate taxes paid for more than a quarter of federal outlays in the 1950s and a fifth in the 1960s but fell to just 6 percent last year.
“If we are going to get our nation’s fiscal house back in order, increasing corporate income taxes should play an important role,” the report by Robert McIntyre, Matthew Gardner, Rebecca Wilkins and Richard Phillips says.
The report notes that, over three years, FedEx made $4.24 billion in profits domestically and paid a 0.9 percent effective corporate income tax rate, raising $37 million, while its foreign profits of $1.37 billion were taxed at a 44.9 percent rate, raising $619 million.
International Paper made $1.4 billion in domestic profits over the same three-year period, paid 9.4 percent in corporate income taxes of $138 million. Overseas profits of $1.1 billion were taxed at 19.1 percent, raising $227 million.
The report blames “relentless corporate lobbying, threats and campaign support” for the state of affairs and notes that, while Ronald Reagan reduced corporate loopholes in the mid-1980s, “politicians who claim to be Reagan’s disciples” and who are opposed to government subsidies that interfere with market incentives are behind efforts to reduce corporate tax burdens.
“Besides being unfair, the fact that the government is offering much larger tax subsidies to some companies and industries than others is also poor economic policy,” the report says.
“Most of the time, tax breaks don’t have much effect on business behavior. After all, companies don’t lobby to have the government tell them what to do. Why would they? Instead, they ask for subsidies to reward them for doing what they would do anyway. Thus, to a large degree, corporate tax subsidies are simply an economically useless waste of resources.”
In response to a request from The Commercial Appeal, FedEx released a statement:
“FedEx is a full rate taxpayer and pays all taxes owed to local, state and federal governments. The FedEx tax information cited by these various groups is misleading and inaccurate. It does not reflect the substantial level of federal taxes we do pay. Nor does it reflect the fact that large amounts of our federal income taxes in recent years have simply been deferred to later years due to accelerated depreciation deductions on new investments we made.
“The simple fact is this: FedEx has paid $3.5 billion in federal income tax in the last 10 years alone. We have not reported an effective tax rate of less than 35 percent in more than 20 years.
“FedEx has been a job and economic growth engine across the U.S. by investing billions of dollars even during a soft economy. By purchasing large capital items from U.S. companies, we keep Americans working. The tax activists refer to years during which our federal cash income tax was lower than normal because of depreciation deductions we received from these job-creating significant capital investments and a very large cash contribution to our employee pension fund, which reinvests in our team members’ future.
“In the past few years, we have committed several billion dollars to buy new aircraft, trucks, computer equipment and services, facilities and environmental infrastructure such as solar panel installations. Major investment-level purchases create even more jobs for American workers.”
In a prepared statement, International Paper spokesman Patty L. Neuhoff said: “International Paper takes its obligation to comply with all federal, state and local tax laws very seriously.
“The two primary factors that contributed to our low tax rate in 2010 were a $1.1 billion payment in pension contributions, and a change in law to stimulate the economy by allowing 100 percent expensing for capital spending.
“IP spent several hundred million dollars in capital in our U.S. operations in 2010. The combination of the pension payment and capital expenditures resulted in high deductions and low tax rate for 2010.”