Topline
Benefitting from Trump-era tax cuts and capitalizing on loopholes in the tax code, at least 55 prominent U.S. companies paid $0 in federal corporate income taxes in 2020 on billions of dollars in profits, according to a report published Friday by the Institute on Taxation and Economic Policy.
Key Facts
Analysts determined that the 55 companies, all part of the S&P 500 or Fortune 500, would have paid a combined total of $8.5 billion last year if they had paid at a 21% rate (the statutory federal corporate tax rate) on their profits.
Not only did they avoid paying any taxes on their profits, but these companies also received $3.5 billion in tax rebates, according to ITEP, a left-leaning, non-profit research group that analyzed each firm’s annual financial reports.
Tax breaks for executive stock options, a provision allowing companies to write off capital investments, federal research and experimentation credits, and tax breaks for renewable energy were some of the legal deductions and exemptions utilized by these businesses to reduce their tax bill dramatically.
26 of the 55 companies, including Nike, which reported more than $2.8 billion of pretax income last year, and FedEx, which generated $1.2 billion, avoided paying any federal income tax in each of the past three years, according to the report.
In an emailed statement to Forbes, a FedEx spokesperson said, “The CARES Act, which was enacted in March 2020, helped companies like FedEx navigate a rapidly changing economy and marketplace while continuing to invest in capital, hire team members, and fund employee pension plans.”
Key Background:
In December of 2017, then-President Trump signed the Tax Cuts and Jobs Act into law, introducing far-reaching changes to the tax code. In addition to slashing the corporate rate from 35% down to 21%, the $1.5 trillion bill provided tax breaks to owners of pass-through companies, whose profits would be taxed through the individual code. Although tax returns are not made public, the Securities and Exchange Commission requires publicly traded companies to disclose pretax income. ITEP analysts were able to mine this data and other information released by each company to determine each corporation’s effective tax rate.
Contra:
Alan D. Viard of the American Enterprise Institute, a conservative research group, told the New York Times that “the fact that a lot of companies aren’t paying taxes says there are a lot of provisions and preferences out there,” adding, “It doesn’t tell you whether they’re good or bad or indifferent. At most, it’s a starting point, certainly not an ending point.”
What To Watch For:
Earlier this week, the Biden administration, aiming to fund infrastructure investment by raising $2 trillion in revenue over 15 years, outlined its plans to boost the corporate tax rate from 21% to 28%. The president’s plan would also enact a minimum tax rate of 15% on large companies’ earnings, even if those corps receive various deductions and exemptions. During a speech Wednesday detailing his new infrastructure spending plan, Biden said: “A fireman, a teacher paying 22% — Amazon and 90 other major corporations paying zero in federal taxes? I’m going to put an end to that.”
Crucial Quote:
“The key here is that the president believes strongly that the biggest corporations and those folks who have done extremely well over the last several decades should pay a bit more,” said National Economic Council deputy director Bharat Ramamurti.
Big Number:
$2.4 trillion. That’s the amount of money a previously proposed Biden tax plan would raise between 2021 and 2030, according to the Tax Policy Center.
Further Reading:
Who Will Be The Biggest Losers From Biden’s Tax Hikes? (Forbes)
Biden Will Push For Tax Hikes For Big Companies And High Earners, Economic Aide Says (Forbes)
55 Corporations Paid $0 in Federal Taxes on 2020 Profits (ITEP)