Billions in Profit, Not One Cent for Taxes

This file is licensed under the Creative Commons Attribution 3.0 Unported license.

Fed-Ex, Nike, Xcel Energy, and dozens of other huge and hugely profitable companies paid not one red cent in taxes last year. While some 55 large corporations avoided taxes entirely, even more companies paid historically low levels because of the 2017 Trump tax cuts. This is just plain wrong.

The tax rate on corporate profits was 35 percent before the Trump tax cut. Over the past 75 years, the lowest corporate tax rate was 34 percent, from 1988-1992. For most of that time, starting in the Eisenhower presidency, the corporate tax rate stayed somewhere between 46 and 53 percent. During those relatively high tax years, the economy grew at a higher rate than it has during the lower tax years since 1988. 

Corporations pay taxes only on profits made after expenses. No profit, no taxes. 

They rarely pay the full tax rate. Various loopholes and legal tax avoidance strategies make the effective tax rate—the rate they actually end up paying—much lower.  According to the Institute on Taxation and Economic Policy, “Profitable American corporations in 2018 collectively paid an average effective federal income tax rate of 11.3 percent on their 2018 income, barely more than half the 21 percent statutory tax rate.”

Trump slashed the corporate tax rate from 35 to 21 percent in 2017. Biden proposes raising the corporate tax rate, but only halfway, back to 28 percent. Republicans in Congress are already howling about that. 

The loopholes and tax breaks built into corporate tax law by Congress favor very big businesses, not the small to medium-sized businesses that are the engines of economic growth. 

Giant corporations also face less enforcement and tax audits. An article in the New York Times described the gyrations that Bristol Myers went through to cheat the U.S. government out of $1.4 billion in taxes.  

They are not alone. Syracuse University analyzed audit data and found: 

“Nearly two out of every three of the 755 largest corporations in the country – those with over $20 billion in assets – were not audited last year. As recently as 2012, nearly all such returns (93%) were being examined by the IRS

“Audits in 2012 of these corporate giants turned up $10.0 billion dollars in unreported taxes. This had dropped by more than half to just $4.1 billion during FY 2020. The dollar significance is even greater if the focus expands to corporations reporting over $250 million in assets. Audits of these large corporations in FY 2012 turned up $24.4 billion in unreported taxes. This fell to just $5.4 billion in FY 2020.”

The bigger the business, the more time and resources needed for audits—and IRS funding for audits has been slashed to the bone. This also means fewer audits of millionaires.

“At a time when Americans face growing economic inequality and financial hardship caused by the COVID-19 pandemic, the Internal Revenue Service (IRS) is letting billions of dollars in tax revenue slip through its fingers because budget and staffing cuts have left the agency incapable of fairly and effectively auditing the 637,212 millionaires now living in the United States.”

This makes me want to stamp my feet and scream “NOT FAIR!” That won’t make any difference. Instead, I’m sending this article to my Senators and Representative and to President Biden with this message: Tax corporations at a higher rate—at least 28 percent, though I think even higher would be better. Audit giant corporations and millionaires. Make them pay their fair share. 

Leave a comment

Filed under Uncategorized

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s