Thirty Of America's Most Profitable Companies Paid 'Less Than Zero' In Income Taxes In Last 3 Years: Report
Many major corporations have managed to pay taxes at just over half of the corporate income tax rate, according to a new report.
Nearly 300 of the nation's most profitable companies paid an average tax rate of 18.5 percent from 2008 to 2010, less than half of the 35 percent corporate tax rate, according to a study by the Citizens for Tax Justice released Thursday. Of the 280 companies, 78 studied paid a tax rate of zero or less during at least one year of the three year period.
And thirty companies, the report says, had a negative income tax rate from 2008 to 2010, even though they took home a combined $160 billion in pre-tax profits.
The financial services industry netted the largest share -- at 16.8 percent -- of the $222.7 billion in total tax subsidies that the companies received, the study found. Wells Fargo took home the most tax subsidies of them all, raking in nearly $18 billion in tax breaks over the last three years.
Officials at some major corporations lashed out at the study's findings following its release. In a statement, GE called the report "inaccurate and and distorted," according to the Washington Post. Verizon spokesman Robert Varettoni, told WaPo that "findings in this and other recent reports have been more politically motivated than truthful."
Even without lowering the corporate tax rate, large companies are still able to take advantage of a variety of loopholes available to them to avoid paying taxes. One, called the "active financing exception" allows corporations to sidestep paying taxes on overseas profits if the company derived those profits by "actively financing" a deal, according to the NYT.
Corporations also commonly take advantage of a rule called "accelerated depreciation," which allows them to write off investments faster than they wear out, according to WaPo. The companies then subtract the falling value of the investments from their taxable income.
The findings come as politicians wrangle over the best way to cut the nation's budget deficit. Republicans recently proposed lowering the corporate tax rate to 25 percent and paying for it by eliminating business tax breaks. A study by the Joint Committee on Taxation, requested by congressional Democrats, found that eliminating the business tax breaks alone wouldn't bring in enough revenue to make up for the lowered rate.
Republican presidential candidate Rick Perry said last month that if elected president he would cut the corporate tax rate to 20 percent. Perry told The New York Times that he didn't care that his tax plan could possibly increase income inequality. Another Republican presidential candidate, Herman Cain, vowed to slash the corporate tax rate as part of his 9-9-9 plan, which if enacted would cap sales tax, corporate income tax and personal income tax at 9 percent each.
Companies such as Apple and Google are lobbying Congress to pass an additional tax loophole known as a repatriation tax holiday that would allow corporations to avoid taxes on more than $1 trillion in offshore profits, Bloomberg reports. In exchange, the companies argue, companies would invest those dollars in the U.S.
U.S. corporations with foreign profits that amounted to 10 percent or more of their worldwide profits paid tax rates to foreign countries that were nearly one-third higher than the tax rates they paid to the U.S., the tax justice study found.
The Heritage Foundation, a conservative think tank, reversed its position on the repatriation tax holiday last month, saying that it wouldn't help to spur U.S. job growth or investment. The Treasury Department found that a similar tax holiday passed in 2004, did little to boost employment growth.
In fact, several companies that benefited from the 2004 law cut jobs in its wake. Dow Chemical, Verizon and Bank of America are just some of the 10 companies that slashed jobs after benefiting from a repatriation tax holiday, according to the Institute for Policy Studies.