February 28, 2014

Wisconsin Budget Project: New Study Finds Large Number of the Major, Profitable Corporations Pay Little in Corporate Taxes

ITEP Work in Action

Thursday, February 27, 2014 at 6:16 PM by Jon Peacock

This week, on the same day that GOP legislators in Congress were unveiling a plan to sharply reduce federal income taxes for corporations, a DC-based think tank released a comprehensive study showing that many highly profitable Fortune 500 companies pay little or no federal corporate income tax. In fact, the analysis of five years of tax data during the period 2008 and 2012 from 288 profitable Fortune 500 companies finds that 26 paid no federal corporate income tax over that five-year period, and one-third paid a U.S. tax rate of less than 10 percent during that period.

The study by Citizens for Tax Justice and the Institute on Taxation and Economic Policy (The Sorry State of Corporate Taxes: What Fortune 500 Firms Pay (or Don’t Pay) in the USA and What They Pay Abroad — 2008–2012) also concludes that: “Most multinationals are paying lower tax rates here in the United States than they pay on their foreign operations.”

The study analyzed the taxes of the 288 Fortune 500 companies that met two criteria: 1) they were profitable in each of the 5 years, and 2) they provided sufficient, reliable information in their financial reports to allow calculation of their effective U.S. and foreign tax rates. Some of the findings include:

Although the statutory corporate federal tax income tax rate is 35%, these 288 corporations paid an average effective rate of just 19.4% over the past five years, slightly more than half the official rate.

111 of the companies enjoyed at least one year in which their federal income tax was zero or less.

26 companies, including Boeing, General Electric, Priceline.com and Verizon, enjoyed negative income tax rates over the entire five-year period, despite combined pre-tax profits of $170 billion.

Among the 125 multinational companies in this sample, two-thirds paid a lower U.S. tax rate than the rate they paid to foreign governments on their foreign profits. On average, their foreign effective tax rate was 12 percent larger than their U.S. effective rate.

The total amount of federal income tax subsidies enjoyed by the 288 profitable corporations over the five years was $362 billion.

Rebecca Wilkins, senior counsel for federal tax policy at Citizens for Tax Justice summed up their general conclusion about the report’s findings:

“This nation faces important questions of how to fund pressing priorities, from education and health care to infrastructure and retirement security. Reforming our tax code is necessary to ensure to we have a just tax system that raises the revenues we need.”

Elsewhere on Feb. 26, House Ways and Means Chairman Dave Camp unveiled a tax plan that would significantly reduce taxes for corporations, while increasing taxes relative to current law, for many families in which parents are struggling to raise their children on poverty wages. Read more about that plan in a new report by the Center on Budget and Policy Priorities (CBPP), which concludes that a mother with two children who works full time at the minimum wage would lose about $2,000 a year when the plan is fully in effect in 2018 – compared to how she fares under current policies.

Another CBPP report explains how Rep. Camp’s plan appears to be revenue-neutral over the first decade, but only because it uses a number of gimmicks that mask the fact that it would significantly increase the federal deficit over time.