Zoom paid $0 in federal income taxes on 4,000% profit increase during pandemic
"If you paid
$14.99 a month for a Zoom Pro membership, you paid more to Zoom than it paid in
federal income taxes even as it made $660 million in profits last year."
By Jake Johnson, staff writer for Common Dreams
The reason, according
to ITEP senior fellow Matthew Gardner, lies mainly in Zoom's "lavish use
of executive stock options," a common tactic of big corporations looking
to skirt their federal tax obligations.
"Companies that
compensate their leadership with stock options can write off, for tax purposes,
huge expenses that far exceed their actual cost," Gardner explained.
"This is a strategy that has been leveraged effectively by virtually every
tech giant in the last decade, from Apple to Facebook to Microsoft. Zoom's
success in using stock options to avoid taxes is neither surprising nor
(currently) illegal."
Zoom reported $660
million in pre-tax profits in 2020, a massive leap from its 2019 pre-tax
profits of $16 million. Eric Yuan, Zoom's founder and CEO, accurately described
2020 an as "unprecedented year" for the nine-year-old company in its
latest earnings report.
Gardner noted that use of the executive stock option loophole is not the only way Zoom managed to pay no federal corporate income tax on its pandemic profits.
"The company
appears to have enjoyed tax benefits from accelerated depreciation and research and
development tax credits," he wrote. "Notably, the combination of
three tax breaks appears to be the recipe that Amazon and Netflix have used with such success to
reduce their federal tax bills during the Trump corporate tax era so far.
Zoom's corporate tax avoidance has helped create a short-term cash bonanza for
the company: Zoom ended the fourth quarter of 2020 with $4.2 billion in cash
and equivalents."
Sen. Bernie Sanders
(I-Vt.), chairman of the Senate Budget Committee, took aim at the company's tax
avoidance on Twitter, pointing out that "if you paid
$14.99 a month for a Zoom Pro membership, you paid more to Zoom than it paid in
federal income taxes even as it made $660 million in profits last year—a 4,000
percent increase since 2019."
"Yes,"
Sanders said. "It's time to end a rigged tax code that benefits the
wealthy and powerful."
On Monday morning,
Sanders announced he will be presiding over a Senate Budget Committee hearing
Thursday titled, "Ending a Rigged Tax Code: The Need to Make the
Wealthiest People and Largest Corporations Pay Their Fair Share of Taxes."
"From a moral,
economic, and political perspective, our nation will not thrive when so few
have so much and so many have so little," the Vermont senator said.
"We need a tax system which asks the billionaire class to pay its fair
share of taxes and which reduces the obscene level of wealth inequality in
America."
