Nike, FedEx, and Dish Network are among the biggest beneficiaries of America’s tax code.
As the Biden administration prepares to raise corporate taxes, one thing is clear: the current system allows some of the most profitable companies in the country to pay nothing in federal taxes. In fact, some billion dollar corporations received tax rebates in recent years.
On Friday, the left-leaning Institute on Taxation and Economic Policy (ITEP) released a report indicating that “at least 55 of the largest corporations in America paid no federal corporate income taxes in their most recent fiscal year despite enjoying substantial pretax profits in the United States.”
These 55 companies, the report explains, earned almost $40.5 billion in U.S. pretax income in 2020. The statutory federal tax rate for corporate profits is 21%, so their collective tax bill should have been $8.5 billion. Instead, the group of companies received $3.5 billion in rebates. $8.5B in avoided taxes + $3.5B in rebates = $12B from Uncle Sam’s pocket.
The ITEP says its findings – gleaned from annual financial reports – “continues a decades-long trend of corporate tax avoidance by the biggest U.S. corporations.” The Trump administration was particularly accommodating to big businesses bent on zeroing out their tax bill. In the three year period following the 2017 Tax Cuts and Jobs Act, twenty six of the fifty-five companies identified paid nothing in federal corporate taxes.
The ITEP says the tax avoidance came from corporations across the economy. From the report:
Food conglomerate Archer Daniels Midland enjoyed $438 million of U.S. pretax income last year and received a federal tax rebate of $164 million.
The delivery giant FedEx zeroed out its federal income tax on $1.2 billion of U.S. pretax income in 2020 and received a rebate of $230 million.
The shoe manufacturer Nike didn’t pay a dime of federal income tax on almost $2.9 billion of U.S. pretax income last year, instead enjoying a $109 million tax rebate.
The cable TV provider Dish Network paid no federal income taxes on $2.5 billion of U.S. income in 2020.
The software company Salesforce avoided all federal income taxes on $2.6 billion of U.S. income.
The ITEP also found that dozens of corporations took advantage of the CARES Act – “ostensibly designed to help people and businesses to stay afloat during the pandemic” – to eliminate their federal tax burden. The 55 companies covered in the report “enjoyed at least $500 million of tax breaks last year from the CARES Act provision liberalizing loss carrybacks.” Loss carrybacks are accounting maneuvers that allow companies to use past loses to offset profits.
The report concludes:
When President Trump signaled his intention to cut corporate taxes in 2017, he and Congress had an opportunity to pare back the many loopholes that have allowed companies to avoid tax on much of their income since the early 1980s. But now, with three years of data published on the effective tax rates paid by publicly traded companies, it is clear that the Trump law has not meaningfully curtailed corporate tax avoidance and may even be encouraging it.
The ITEP urges President Biden to close loopholes and adopt a “minimum tax.”
Biden appears to be taking steps to reform the tax code. From The New York Times:
The Biden administration announced this week that it planned to increase the corporate tax rate to 28 percent, and establish a kind of minimum tax that would limit the number of zero-payers. The White House estimated that the revisions would raise $2 trillion over 15 years, which will be used to fund the president’s ambitious infrastructure plan.
