NEW YORK – Just as President Joe Biden is pushing for corporate taxes to help pay for his infrastructure plan, a report by a Washington political group highlights how many corporations are paying zero before taxes despite big profits.
More than 50 of the largest U.S. corporations paid nothing in federal income taxes over the past year, and many received discounts, despite reporting as a group pre-tax profits of nearly $ 40.5 billion, according to the Institute of Taxes and Economic Policy. The group believes that the tax system needs to generate more tax revenue.
The 55 companies named in the report, released April 2, are cross-industry, from agriculture to high-tech. This includes big names like Nike and Duke Energy. According to the report, the companies took advantage of breaks received or extended as part of President Donald Trump’s 2017 tax law revision, as well as the economic bailout that Washington passed last spring.
As part of the 2017 tax cut, the corporate profit rate is 21%. However, companies can use many tools to avoid taxes, such as: For example, amortizing expenses related to the stock options they give to their CEOs and other executives.
Businesses can also take advantage of a number of available tax credits by making investments that the U.S. government seeks to sponsor, much like individuals can get tax breaks to save on a retirement fund or make their home more energy efficient.
At Duke Energy, one of the country’s largest utilities, the company posted tax credits of $ 110 million last year for generating renewable energy from wind turbines, for example. These and other loans helped the Charlotte, North Carolina-based company earn a $ 281 million federal tax discount last year after $ 826 million before tax was reported from continuing operations in the United States.
“Legislators developed this tax policy to encourage corporate taxpayers to invest in economic growth, infrastructure and renewable energies,” said Duke spokeswoman Catherine Butler.
She said federal tax rules allowed Duke to defer, but not eliminate, some cash payments for taxes in the future. The company had approximately $ 9 billion in deferred tax liabilities at the end of 2020, which Butler says will become future tax payments over time.
Nike, meanwhile, used a federal tax credit to boost corporate research and development. The sportswear giant also received tax benefits related to stock-based compensation for its fiscal year ended May 31. He received a total of $ 109 million in tax breaks after posting pretax income of $ 2.9 billion for the year.
Officials from Nike, based in Beaverton, Oregon, could not be immediately reached for comment.
“Most CEOs of large publicly traded companies don’t risk jail for stopping paying taxes when Congress gives them so many legal options,” said Steve Wamhoff, director of federal tax policy at the Institute for Taxes and Taxes Economic Policy.
The $ 2.2 trillion bailout that Washington approved last spring to ease the pain caused by the pandemic opened up more opportunities for companies to contain their federal tax burdens. The law allowed companies to use losses reported in 2018-2020 to reduce tax liabilities from previous years, even if the income was taxed at higher tax rates.
“When President Trump announced his intention to cut corporate taxes in 2017, he and Congress had an opportunity to fill the many loopholes that allowed companies to avoid taxes on much of their income since the early 1980s,” the authors wrote Report. Wamhoff and Matthew Gardner wrote. “But now that three years of data has been published on the effective tax rates paid by publicly traded companies, it is clear that the Trump Act has not significantly restricted corporate tax avoidance, and may even have encouraged it.”
In total, companies paid nearly $ 243 billion in tax revenue in 2019, down 30% from five years earlier.
One in three companies with assets greater than $ 1 billion did not pay federal income tax from 2013 to 2017. This emerges from a report prepared last year by staff on the House Joint Tax Committee. For smaller businesses with assets less than $ 1 billion, two out of three businesses have no federal income tax liability in any given year.
According to the Tax Foundation, a group that wants tax policies that lead to greater economic growth, corporate taxes accounted for 3.9% of total U.S. tax revenue in 2019. This corresponds to an average of 9.6% in all economies of the Organization for Economic Co-operation and Development.
That number could rise if Biden can push through his proposed corporate tax changes to fund his $ 2.3 trillion national infrastructure renewal plan.
A proposal to raise the corporate tax rate to 28% may not make much of a difference to companies using tax credits and other tools to avoid paying taxes. But Biden’s plan to impose a minimum 15% tax on income companies report to their investors, known as book income, could force some tax-free companies to pay, depending on how it’s done.
Republicans in Congress have already opposed corporate tax hikes, saying they would damage the US economy.