March 25, 2021

Testimony to Senate Budget Committee on Ending a Rigged Tax Code: The Need To Make the Wealthiest People and Largest Corporations Pay their Fair Share of Taxes

Following is testimony of ITEP Executive Director Amy Hanauer before the Senate Budget Committee to consider “Ending a Rigged Tax Code: The Need To Make the Wealthiest People and Largest Corporations Pay their Fair Share of Taxes”

“Chairman Sanders and Ranking Member Graham, thank you for the opportunity to speak to this committee.

My name is Amy Hanauer and I’m the Executive Director of the Institute on Taxation and Economic Policy, a research institute with expertise on corporate taxation.

In 2020, the pandemic killed hundreds of thousands of Americans and unemployment soared to levels not seen since we began collecting data in the 1940s.

Despite that, Amazon’s profits surged to $20 billion last year. But the company paid just 9.4 percent of its profits in federal corporate income taxes, after paying zero in 2018 and about 1 percent in 2019. Their total effective federal corporate income tax rate over three years was just 4.3 percent on $44.7 billion in profits. That’s a far cry from the statutory rate of 21 percent.

Netflix’s 2020 profits surged to $2.8 billion because people went out less and watched more TV at home. Yet the company paid less than 1% of those profits in federal corporate income taxes, after paying nothing in 2018 and about 1 percent in 2019. Over those three years, Netflix paid a total effective rate of just 0.4 percent on $5.3 billion in profits. Again, not at all close to the 21 percent statutory rate.

And late last week we learned that Zoom, the video conferencing platform that has become ubiquitous for meetings, saw its profits spike by a staggering four thousand percent last year. But the company paid zero federal corporate income tax for 2020.

Zoom, Amazon and Netflix are not alone. The pandemic has been hard on many businesses large and small, and many reported losses last year. But some with profits – indeed even some with record profits – still avoided paying corporate income tax. So far, my colleagues have found more than 50 S&P 500 corporations that reported profits but paid no federal corporate income tax last year – a year when our lives depended on public resources for testing, research and vaccine distribution.

Let me point out some truths about corporate tax avoidance.

First, lawmakers could address this but have chosen not to. We knew about the corporate tax avoidance crisis before Congress drafted a major tax overhaul, signed into law by former President Trump in 2017. The figures I share with you today are the result of that law’s first three years.

Second, this tax avoidance is not due to the economic crisis. The corporate income tax is a tax on corporate profits. It doesn’t affect companies that aren’t profiting. Closing special breaks and loopholes would not hurt businesses that are laid low by the pandemic.

This matters to the Senate Budget Committee because you will soon be asked to decide what our nation can afford to do to improve our economy and health going forward.

Our research finds that corporations already have too many tax breaks. But some lawmakers want to preserve or even expand corporate tax cuts in the Trump law.

Some of the same lawmakers also claim that we cannot afford to help people directly. They argue that we cannot make permanent the Child Tax Credit expansion that is projected to reduce child poverty by 45 percent, or that we can’t invest in green jobs, or in updating failing infrastructure.

I ask that instead of choosing corporate tax breaks, you choose to provide benefits directly to families in ways that clearly reduce poverty and improve lives.

In my written testimony, I specify how we can stop corporate tax avoidance, including by passing some of the bills introduced by members of this committee. We look forward to working with you on making our tax code work for all of us. Thank you for this opportunity to testify.”