Between 2008-2010, 280 of the largest corporations paid an average federal income tax of 18.5% despite the statutory rate being 35%.
Scrooge McDuck skiing on his stash while innocuous kids build money castles.
Amidst a national discussion about corporate taxation, Citizens for Tax Justice, a nonpartisan research group, and the Institute on Taxation and Economic Policy released a staggering, comprehensive report yesterday which reviewed the taxes paid by 280 Fortune 500 companies between 2008 and 2010. What they found is that on average the top 280 corporations paid half of the statutory rate, and that 30 companies had a negative tax rate, meaning they made money after taxes.
Take Verizon, for instance, who in 2010 made $12 billion; under the statutory rate they would pay the IRS $4.2 billion. However, they astonishingly managed to profit after taxes, get this, to the tune of $706 million dollars. That means Verizon’s income increased after taxes, putting them at $12.7 billion for 2010, and the federal government out $5 billion.
“These 280 corporations received a total of nearly $224 billion in tax subsidies,” said Robert McIntyre, Director at Citizens for Tax Justice and the report’s lead author. “This is wasted money that could have gone to protect Medicare, create jobs and cut the deficit.”
Wells Fargo toped the charts in this regard, making out with nearly $18 billion in breaks from the U.S. Treasury. Boeing, AT&T, Exxon Mobile, Goldman Sachs, Wal-Mart, and Coca-Cola were among the companies who received billions in subsidies.
And when it came to the lowest tax rate, Pepco Holdings’ was -57.6%, beating #2, General Electric, who paid -45.3%. Yes, those are negative signs.
A negative tax rate, in this report, indicates companies whose overall income increased after they filed taxes. Whether through loopholes or subsidies or both, these companies made out with more money from the U.S. Treasury than they put in. Keep in mind that all of these companies were profitable – this is not the highly-publicized “bailout money.”
In fact, Wells Fargo, General Electric, and Verizon were among 30 public firms that paid no taxes at all during these years. In 2009 alone, 49 companies paid no taxes at all. Again, all the companies were profitable; they all deserved a tax rate of (positive) 35%.
The tone of the report is decisive but not derisive. It hones in on the appalling fact that “corporate tax loopholes are so out of control that most Americans can rightfully complain, ‘I pay more federal income tax than General Electric, Boeing, Dupont, Wells Fargo, Verizon, etc., etc., all put together.’” The reports authors call this “an unacceptable situation.”
Although the average rate of taxes paid by these firms was 18.5% during the years 2008 to 2010, between 2009 and 2010 it was 17.3%, which is below half of 35%, and a matter of billions lost on the Treasury.
So what are we left to think about corporate taxation?
When I first saw signs at the Occupy movement proclaiming “Tax the rich!” I was dubious that we weren’t already taxing them. Finding out that publicly traded corporations are supposed to pay a tax rate of 35% was easy. It’s on the IRS’s website.
That’s why this study is so crucial. While statutory rates are made widely available, buried loopholes in our tax policy are not. If the Occupy movement were to issue one demand it ought to be reforming campaign finance because politicians are the ones who allow these loopholes to exist.
Top corporations across the board are lobbying for even lower rates, despite the fact that they are the lowest they’ve ever been. It’s a platform piece for all the GOP candidates: lower corporate tax rates.
Perhaps the more appalling conclusion is that giving corporations massive tax breaks is decisively not part of President Obama’s platform, yet during the years of his presidency, especially the year he took office, which was the worst (or best, depending on your perspective) year for corporate taxation, they have run rampant.
Although these data are news to most of the American public, they aren’t news to the IRS. The corporations studied who seem to be engaged in illegal activity are actually scotch-free.