55 major corporations paid $0 in 2020 federal taxes
Thomas Catenacci, DCNF
Dozens of the largest U.S. corporations paid $0 in federal taxes last year as a result of long-standing tax breaks, according to an Institute on Taxation and Economic Policy report.
At least fifty-five major corporations were able to avoid paying any federal taxes in 2020 even while reporting significant profits, an Institute on Taxation and Economic Policy (ITEP) report released Friday showed. President Joe Biden proposed to increase the U.S. corporate tax rate from 21% to 28% Wednesday as part of his $2 trillion infrastructure plan, citing the need to stop corporations from avoiding federal taxes.
“We should continue to call on policymakers to address the gaping corporate tax loopholes that make this kind of tax avoidance possible,” Matthew Gardner, a senior fellow at ITEP and an author of the report, said in a press release.
“But in a pandemic year when so many small businesses shuttered and millions of people lost their economic livelihoods, we should be asking bigger questions about a tax system so flawed that it asks next to nothing of profitable corporations that derive great benefit from our economy—in good and bad economic times,” Gardner said.
The Fortune 500 corporations, including Nike, Salesforce, Dish Network and FedEx, were able to leverage tax breaks in the Tax Cuts and Jobs Act (TCJA) of 2017, which lowered the corporate tax rate to 21%, and the 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act, according to the report.
While the 55 companies collectively earned more than $40 billion in profits last year, they paid no federal taxes, the report found. They would have paid $8.5 billion at the current corporate tax rate of 21%.
The companies also received $3.5 billion in rebates, meaning their effective tax rates were below 0%, according to ITEP. Further, 26 of the corporations analyzed in the study have avoided paying any federal taxes since 2018.
The corporations used a variety of tax breaks like the federal research and experimentation credit, which rewards innovations, and the capital investment credit, which allows companies to write off investments in new technology or equipment, according to the report. Limitations to Securities and Exchange Commission disclosure rules prevented the report from finding all the ways corporations avoid federal taxes.
“The fact that a lot of companies aren’t paying taxes says there are a lot of provisions and preferences out there,” Alan Viard, a resident scholar at the conservative American Enterprise Institute, told The New York Times. “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.”
While the report mainly pointed to the TCJA and CARES Act, corporate tax avoidance has been common for decades, according to the report.