Workers at some of the biggest corporations in the world are paying higher tax rates than their employers, according to a new study by the Institute on Taxation and Economic Policy.
The Republican-passed tax cuts signed by President Trump in 2017 permanently lowered the corporate tax rate from 35 percent to 21 percent but many companies are paying nowhere near that figure. The study identified 379 Fortune 500 companies that turned a profit in 2019 and found that the companies paid an average tax rate of 11.3 percent.
At least 91 of the profitable Fortune 500 companies paid no taxes or had a negative tax rate, including giants like Amazon, Starbucks, Netflix and General Motors. Another 56 companies paid an effective tax rate of 2.2 percent. Just 57 of the companies the study looked at paid effective tax rates of 21 percent or higher.
Under the previous tax code, the same companies paid an effective tax rate of 21 percent between 2008 and 2015, according to the report.
“This is by design,” the report said. “When drafting the tax law, lawmakers could have eliminated special breaks and loopholes in the corporate tax to offset the cost of reducing the statutory rate. Instead, the new law introduced many new breaks and loopholes, though it eliminated some old ones.”
The report said that some companies were able to pay negative tax rates because “a corporation carries back excess tax deductions and/or credits to an earlier year or years and receives a tax refund check from the U.S. Treasury Department.” As a result, Amazon got a $129 million rebate from taxpayers despite earning $10.8 billion in profits. The video game company Activision Blizzard received a $243 million tax rebate on $447 million in profits. Despite paying an effective tax rate of -54.4 percent, the company slashed 800 jobs last year, according to The Washington Post.
Matthew Gardner, a senior fellow at the institute who co-authored the report, told the Public News Service that there is nothing illegal about what the companies are doing.
“There is no implication that any of this is illegal. By all accounts, these companies are simply using the legal tax breaks that they lobbied Congress to give them,” he said.
But Gardner noted that worker wages have remained stagnant and said the report was “disturbing” for middle-class workers who now pay higher tax rates than the biggest corporations.
“There is a problem of democratic distrust right now,” he said. “People do not trust their government, they don’t trust elected officials. And it’s precisely this sort of finding that reinforces that distrust.”
Republicans argued that the tax cuts would prompt companies to invest more. But a report from JPMorgan found that much of the tax savings went to stock buybacks that enrich executives instead.
“This is corporate executives saying, ‘Rather than investing back into the business by making capital expenditures or buying equipment, I’m just going to buy my own shares,'” JP Morgan analyst David Kelly told Axios last year.
While this study specifically looked at the effects of the tax cuts since their passage in 2017, the Trump administration has also quietly used loopholes in the law to change tax rules to give big corporations an even bigger tax break.
The Treasury Department caved to intense lobbying efforts from various industries to change the rules for new corporate taxes included in the 2017 bill to allow industries like international banks tens of billions in added tax savings, The New York Times reported.
“Treasury is gutting the new law,” University of Houston tax law professor Bret Wells told the outlet. “It is largely the top 1 percent that will disproportionately benefit — the wealthiest people in the world.”
As a result, a tax aimed at cracking down on offshore profits is expected to collect a “small fraction” of the $150 billion it was projected to raise by Congress.
The department is expected to finalize additional rules in the coming weeks, the Times reported, and “big companies have spent this fall trying to win more” tax breaks, with some even threatening to move overseas if the administration does not cave to their demands.
Truthout Is Preparing to Meet Trump’s Agenda With Resistance at Every Turn
Dear Truthout Community,
If you feel rage, despondency, confusion and deep fear today, you are not alone. We’re feeling it too. We are heartsick. Facing down Trump’s fascist agenda, we are desperately worried about the most vulnerable people among us, including our loved ones and everyone in the Truthout community, and our minds are racing a million miles a minute to try to map out all that needs to be done.
We must give ourselves space to grieve and feel our fear, feel our rage, and keep in the forefront of our mind the stark truth that millions of real human lives are on the line. And simultaneously, we’ve got to get to work, take stock of our resources, and prepare to throw ourselves full force into the movement.
Journalism is a linchpin of that movement. Even as we are reeling, we’re summoning up all the energy we can to face down what’s coming, because we know that one of the sharpest weapons against fascism is publishing the truth.
There are many terrifying planks to the Trump agenda, and we plan to devote ourselves to reporting thoroughly on each one and, crucially, covering the movements resisting them. We also recognize that Trump is a dire threat to journalism itself, and that we must take this seriously from the outset.
Last week, the four of us sat down to have some hard but necessary conversations about Truthout under a Trump presidency. How would we defend our publication from an avalanche of far right lawsuits that seek to bankrupt us? How would we keep our reporters safe if they need to cover outbreaks of political violence, or if they are targeted by authorities? How will we urgently produce the practical analysis, tools and movement coverage that you need right now — breaking through our normal routines to meet a terrifying moment in ways that best serve you?
It will be a tough, scary four years to produce social justice-driven journalism. We need to deliver news, strategy, liberatory ideas, tools and movement-sparking solutions with a force that we never have had to before. And at the same time, we desperately need to protect our ability to do so.
We know this is such a painful moment and donations may understandably be the last thing on your mind. But we must ask for your support, which is needed in a new and urgent way.
We promise we will kick into an even higher gear to give you truthful news that cuts against the disinformation and vitriol and hate and violence. We promise to publish analyses that will serve the needs of the movements we all rely on to survive the next four years, and even build for the future. We promise to be responsive, to recognize you as members of our community with a vital stake and voice in this work.
Please dig deep if you can, but a donation of any amount will be a truly meaningful and tangible action in this cataclysmic historical moment.
We’re with you. Let’s do all we can to move forward together.
With love, rage, and solidarity,
Maya, Negin, Saima, and Ziggy