73 Major Corporations Paid Just 5.3% Federal Tax Rate Between 2018 and 2020: Report

Thirty-nine U.S. corporations reaping over $120 billion in profits between 2018 and 2020--the first three years of the so-called "GOP tax scam"--paid no net federal income tax, or claimed refunds during that period, a report published Thursday by the Institution on Taxation and Economic Policy revealed.

"The 39 corporations that paid nothing over three years received $29.7 billion in corporate income tax breaks during that period."
--ITEP report

The report (pdf), entitled Corporate Tax Avoidance Under the Tax Cuts and Jobs Act, notes that while some of the 39 companies--all of them in the S&P 500 or Fortune 500--paid federal income tax in one or more of the years analyzed in the study, "their total federal income taxes for the three-year period were either $0 or a negative amount, meaning they received a refund from the IRS for taxes paid in previous years."

This, despite the firms' realization of $122 billion in collective profits during the 2018-20 study period. Those three years were the first years of the Tax Cuts and Jobs Act (TCJA), which was signed by former President Donald Trump in December 2017.

Additionally, the analysis found that 73 other profitable companies paid less than half of the 21% statutory federal corporate income tax rate under the TCJA from 2018 to 2020. These firms paid an effective rate of just 5.3% during the three-year period.

"The 39 corporations that paid nothing over three years received $29.7 billion in corporate income tax breaks during that period," ITEP notes, while "the 73 corporations that paid less than half the statutory corporate tax rate over three years received a combined $67.5 billion in corporate income tax breaks during that time."

The new analysis follows an April ITEP report revealing that 55 companies paid $0 in federal income taxes on a combined $40.5 billion in profits.

According to the new report:

Among the 39 corporations that avoided paying federal income taxes over three years, T-Mobile reported the largest profits. It reported $11.5 billion in profits over this time but had a federal income tax liability of negative $80 million, meaning the company received $80 million in tax refunds...

Among the 73 corporations that paid less than half of the statutory rate are household names such as Amazon, Bank of America, Deere, Domino's Pizza, Etsy, General Motors, Honeywell, Molson Coors, Motorola, Netflix, Nike, Verizon, Walt Disney, Whirlpool, and Xerox--which all paid effective federal income tax rates in the single digits.

ITEP explains numerous ways in which corporations avoid paying taxes:

• Accelerated depreciation allows companies to write off equipment costs more quickly than the equipment loses value, with the TCJA empowering businesses to immediately write off all the costs of such investments;
• Some companies lower their tax burden by exploiting a tax break for executives' stock options;
• Accelerated depreciation and stock option tax breaks enable companies to report lower earnings to the IRS than they report to shareholders, further lowering their tax liability; and
• Companies often subsidize their research and development costs via R&D tax credits.

"It's clear that many companies are paying abysmally low effective tax rates even in the years when they pay something," senior ITEP fellow and report co-author Matthew Gardner said in a statement. "Looking at a single year tells us a lot, but when we look at corporate tax-paying habits over several years, we get a better sense of the scale of the problem. This makes a clear case for Congress to enact significant tax reforms."

Denounced by critics as the "GOP tax scam" and opposed by a majority of Americans at the time of its passage, the TCJA reduced the federal corporate income tax rate from 35% to 21%, allowed companies to write off certain capital investments for five years, increased the exemption amount for estate tax from $5 million to $10 million, and made it easier for U.S. corporations to avoid paying taxes on income earned abroad.

"President Biden's proposals would not solve all the problems with our tax system but they could significantly reduce the worst corporate tax avoidance we have identified."
--Steve Wamhoff, ITEP

As he signed the measure, Trump said that "corporations are literally going wild" over it, just moments after touting the legislation as "a bill for the middle class."

Hours after signing the bill, however, the former president reportedly told wealthy friends at his Mar-a-Lago resort in Palm Beach, Florida that "you all just got a lot richer."

Indeed, a 2019 report from the Economic Policy Institute and the Center for Popular Democracy showed that the TCJA "delivered big benefits to the rich and corporations but nearly none for working families."

The ITEP report notes that President Joe Biden "has proposed to raise the statutory federal corporate income tax rate from 21% to 28% and end or limit many of the breaks that allow corporations to avoid taxes."

According to a Morning Consult poll published in April, nearly two-thirds of U.S. voters favor higher taxes on businesses to pay for the Biden administration's $2.25 trillion infrastructure and employment legislative proposal.

An analysis published earlier this year by the Penn Wharton Budget Model showed that Biden's proposed 7% corporate tax hike would increase government revenue by $891.6 billion between 2022 and 2031, and by nearly $1.49 trillion between 2022 and 2036.

However, the president has angered progressives by reportedly signaling his openness to a smaller corporate tax increase--to 25% instead of 28%.

"President Biden's proposals would not solve all the problems with our tax system but they could significantly reduce the worst corporate tax avoidance we have identified," said Steve Wamhoff, director of federal policy at ITEP and report co-author.