I met with my accountant on Monday. The bad news is once again I owe additional federal income taxes. I don’t have a fancy lawyer or any special tax breaks – so I paid. A little painful, but I figure I am paying my fair share to keep the United States and the American people safe, educated, healthy, and working.
Just this week we learned that in 2005 Donald Trump paid only a 25 percent tax rate on $150 million in personal income because he was able to take advantage of a tax code with plenty of deductions for rich people like him. Apparently what Trump did was legal, just shady. The world’s greatest businessman claimed he lost lots and lots of money a decade earlier because of “large-scale depreciation for construction,” so he should be spared from paying his full share of taxes – like forever. Thanks to the report by Rachel Maddow of MSNBC and additional research by the New York Times, we now know that if Trump’s proposed tax reforms ever get approved, his 2005 tax bill of $38 million would only have been $7 million, a tax rate of less than 5 percent. This is a lower federal tax rate than middle-class people with incomes between $75,000 and a $100,000 pay.
I think the American people have the right to see all of President Trump’s tax filings to help us decide on any future changes to the tax laws. Donald Trump owns the 48th largest private company in the United States.
However, because of a new study by the non-partisan Institute on Taxation and Economic Policy (ITEP) we do know that more than half of wealthy Fortune 500 companies find ways to way underpay on their income taxes, and some big named companies pay no taxes at all. Are they tax cheats? You decide!
Donald Trump and Republicans who control the United States House of Representatives claim the corporate tax rate is too high and should drop precipitously, but according to the study, the 35 percent corporate tax rate is a myth for many highly profitable Fortune 500 companies. Included in the survey are companies that are incorporated in the U.S., operate in the U.S., and file financial statements here. Fortune 500 companies are publicly traded rather than privately owned. Their $12 trillion in revenue are two-thirds of the U.S. Gross Domestic Product. Their annual profits are between $800 and $900 billion. The Trump Organization’s revenue was $9.5 billion in 2015, which would place it at about #300 on the Fortune 500 list if it were a publicly traded company.
The ITEP study examined eight years of data on federal income taxes paid by Fortune 500 companies that “provided sufficient, reliable information in their financial reports to allow calculation of their effective U.S. and foreign tax rates.” According to Matthew Gardner, ITEP senior fellow and lead author of the report “many of the big corporations that are lobbying for a lower corporate tax rate to be more ‘competitive’ already pay substantially less than the 35 percent statutory rate.” The report concluded that “two-hundred and fifty-eight companies were profitable in every year” between 2008 and 2015. However, “Although the statutory corporate tax rate is 35 percent, collectively, these companies paid an average effective rate of 21.2 percent.”
Among the report’s key findings were that in at least one year, one hundred large and profitable American companies paid no federal income taxes. In some cases, the companies even collected from the federal government and American taxpayers because of tax credits that subsidize their operations. During the same period twenty-four paid no taxes in four of the eight years studied. Even more astonishing, eighteen companies, including General Electric, International Paper, Priceline.com, and PG&E, paid NO FEDERAL INCOME TAXES during the entire eight-year period. Utilities, Gas, and Electric companies got away the cheapest, paying roughly 3 percent in taxes a year.
Twenty-five companies combined received almost $300 billion in tax breaks over the eight years. Five companies alone, AT&T, Wells Fargo, J.P. Morgan Chase, Verizon, and IBM, got a total of $130 billion in tax breaks.
It is no secret how these companies get away with cheating or robbing the public purse. According to the Center for Responsive Politics’ website OpenSecrets.org in 2016 AT&T, Boeing, and Exxon Mobile are among the largest individual lobbyists putting dollars into legislative campaigns. Apple, Fox, General Electric, Goldman Sachs, IBM, JPMorgan Chase, Koch, Microsoft, Oracle, Proctor & Gamble, Time Warner, Verizon, and Wells Fargo, are also big spenders but primarily through industrial associations.
To stop the rip-off and give-away, the Institute on Taxation and Economic Policy recommends that Congress pass laws to force American multinational corporations to pay U.S. taxes on their offshore profits, change acceptable depreciation deductions, prohibit deductions based on “phantom” expenditures, require transparent financial reports, and “reinstate a strong corporate Alternative Minimum Tax.”
These recommendations are solid, but unlikely, with corporations, Republicans, and Donald Trump in charge of the federal treasury. Major corporations and people like Trump don’t cheat by breaking the law, they cheat by making the law.
Follow Alan Singer on Twitter: https://twitter.com/ReecesPieces8