Some companies paid less than zero
A study released Thursday by the Institute on Taxation and Economic Policy (ITEP) examines 342 companies that were profitable during each of the first five years of the tax law's enactment.
The new research shows that corporate tax avoidance has been
rampant under the law, with 23 of the companies included in the study paying
nothing in federal taxes between 2018 and 2022 and 109 businesses paying
nothing in at least one of the five years.
Kinder Morgan, NRG Energy, and T-Mobile were among the
profitable companies that paid a 0% or negative effective tax rate during the
study period.
"When President [Donald] Trump and congressional Republicans slashed the statutory corporate income tax rate from 35% to 21%, they could have maintained or even increased the effective rate paid by corporations by shutting down special breaks and loopholes in the corporate income tax," reads the new report.
"But from the very beginning of
the debate over the 2017 legislation, it was clear their goal was to allow
corporations to contribute less to the public investments and the society that
makes their profits possible."
Nearly a quarter of the companies analyzed by ITEP
"paid effective tax rates in the single digits or less" during the
law's first five years, including prominent corporations such as Netflix, Nike,
and Citigroup.
ITEP found that the "industries enjoying the lowest
five-year effective tax rates were utilities (negative 0.1%); oil, gas, and
pipelines (2.0%); motor vehicles (3.2%); and telecommunications (7.7%)."
On average, the 342 companies included in the analysis
paid an effective tax rate of 14.1% between 2018 and 2022—significantly less
than the 21% statutory rate established by the Tax Cuts and Jobs Act.
The difference between what companies would have paid in
taxes if they were held to the 21% statutory rate and what they actually paid
amounts to a major taxpayer subsidy, ITEP said. The 342 companies received a
combined $275 billion in subsidies during the first five years of the Trump-GOP
tax law, with the majority going to just 25 companies.
Bank of America received the largest
tax break of all the companies analyzed—$23.89 billion.
"For many of the biggest corporations in America,
our 21% tax rate is an accounting fiction," said Matt Gardner, a senior
fellow at ITEP and the lead author of the new study. "Because of an array
of special-interest tax breaks, the most profitable corporations in America
routinely pay effective tax rates far below the legal rate."
While corporate tax avoidance certainly didn't begin with
the 2017 tax law, ITEP's study notes that it "did little to change"
the status quo—"except to allow companies to pay less than ever."
"Corporate tax avoidance occurs because Congress
allows it to occur, and the Trump tax law made it worse," the analysis
says.
Some notorious tax avoiders, such as Amazon, were
excluded from the study because they reported a loss during at least one of the
five years that ITEP examined. Amazon paid an effective tax rate of 8.9%
between 2018 and 2022.
"Americans who heard President Trump and his
supporters in Congress tout the 21% corporate income tax rate they enacted in
2017 may be alarmed to hear that so many corporations pay much less than that
in reality," said Steve Wamhoff, ITEP's federal policy director and report
co-author. "But it does not have to be this way. Congress should take more
steps to crack down on this widespread corporate tax avoidance."
The report specifically advocates a global minimum tax
that would require multinational companies to pay an effective rate of at least
15%, a proposed change aimed at cracking down on profit-shifting. The Biden
administration negotiated a
global minimum tax deal with other nations in 2021, but the divided U.S.
Congress has yet to advance the proposal.
"Drafters of the Trump tax law made some token
efforts to address these problems, for example, by imposing a weak U.S. tax on
certain profits that American corporations claim to earn offshore," ITEP's
report observes. "This left the corporate income tax in dire need of the
Biden administration's efforts to reform it."
