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DESPITE HUGE PRETAX PROFITS, BIG U.S. FIRMS PAY ZERO TAX
- By The Financial District
- Apr 4, 2021
- 2 min read
Just as President Joe Biden is pushing to raise taxes on companies to help pay for his infrastructure plan, a report from a Washington policy group is highlighting how many firms pay zero despite making big pretax profits.
More than 50 of the largest US companies paid nothing in federal income taxes last year, with many getting rebates, even though they reported almost $40.5 billion in pretax profits as a group, according to the Institute on Taxation and Economic Policy.
The group believes the tax system needs to raise more tax revenue, Stan Choe and Ken Sweet reported for the Associated Press (AP).
The 55 companies named in the report issued Friday cross many industries, from agriculture to high tech, and they include such big names as Nike and Duke Energy.
The report says the companies took advantage of breaks that were preserved or expanded under President Donald Trump’s 2017 overhaul of the tax code, as well as the economic rescue package that Washington passed last spring.
Under the 2017 tax cut, the rate on corporate profits is 21%. But companies can use many tools to avoid taxes, such as writing off expenses related to the stock options they give their CEOs and other executives.
Corporations altogether paid nearly $243 billion in total tax receipts in 2019, down 30% from five years earlier. One of every three corporations with more than $1 billion in assets paid zero in federal income taxes from 2013 through 2017, according to a report prepared last year by the staff of the House of Representatives joint committee on taxation.
For smaller companies, with less than $1 billion in assets, two out of three companies have zero federal income tax liability in a given year. In 2019, corporate taxes made up 3.9% of total US tax revenue, according to the Tax Foundation, a group that wants tax policies that lead to greater economic growth.
That compares with an average of 9.6% across the economies in the Organization for Economic Cooperation and Development (OECD).
