People in the U.S. have just filed their tax returns, and while many average Americans might see smaller returns than usual due to COVID-19 pandemic-related factors, at least 19 Fortune 500 companies have paid close to nothing.
An analysis of financial filings released Tuesday by liberal think tank Center for American Progress showed that companies such as AT&T, Exxon Mobil and Bank of America Corp. paid “little or no taxes” for 2021.
According to a 2020 Motley Fool report, IRS data at the time revealed that Americans who filed taxable returns paid an average income tax payment of $15,322 in 2018. Based on the U.S. Census Bureau data, median household income estimate of $63,179 for 2018, that figure would account for approximately 24% of a household’s income.
According to the Center for American Progress analysis the following 19 companies had a U.S. federal effective tax rate under 10% for 2021, even as Bloomberg News reported that U.S. companies had their most profitable year since 1950:
1. AT&T Inc., -4.1%
2. American International Group Inc., -2.2%
3. Dow Inc., -3.1%
4. Charter Communications Inc., -0.2%
5. General Motors Co., 0.2%
6. MetLife Inc., 1.3%
7. Merck & Co. Inc., 4%
8. Ford Motor Co., 1%
9. Chevron Corp., 1.8%
10. FedEx Corp., 4.2%
11. Coca-Cola Co., 7.1%
12. Exxon Mobil Corp., 2.8%
13. Nike Inc., 5.9%
14. Bank of America Corp., 3.5%
15. United Parcel Service, 9.9%
16. Verizon Communications, 6.9%
17. Amazon.com Inc., 6.1%
18. JPMorgan Chase & Co., 5.9%
19. Microsoft Corp., 9.7%
Of these companies, AT&T, Charter Communications, AIG and Dow Inc. – companies that each pulled in more than $1 billion in earnings last year – paid no federal income taxes. Although the tax rate for large corporations is nominally 21%, according to the Center for American Progress, investor filings show that many corporations pay a much lower actual rate on their profits since there are many ways to reduce taxable income under the current tax system.
In a September blog post, the White House also addressed how wealthy individuals avoid taxes.
“The wealthy pay low income tax rates, year after year, for two primary reasons,” said the post. One is that much of their income is taxed at preferred rates and another is that many wealthy people can “choose when their capital gains income appears on their income tax returns and even prevent it from ever appearing.”
An analysis released last year by the Institute on Taxation and Economic Policy non-profit and non-partisan organization showed that “at least 55 of the largest corporations in America paid no federal corporate income taxes in their most recent fiscal year despite enjoying substantial pretax profits in the United States,” partially due to the Tax Cuts and Jobs Act (TCJA) put in to place in 2017. CARES Act tax breaks enacted in the spring of 2020 also contributed.
“The fact that massive and highly profitable corporations are not paying their fair share is a further illustration of how the corporate tax reforms proposed by President Joe Biden are urgently needed,” said the Center for American Progress.
“President Biden’s Build Back Better Agenda will crack down on the unfair tax schemes that give big corporations a leg up,” said an August 2021 statement from the White House. “According to a new Treasury Department analysis, the President’s Agenda will protect 97% of small business owners from income tax rate increases, while delivering tax cuts to more than 3.9 million entrepreneurs.”
Biden administration plans to make the tax system more equitable include: raising the corporate income tax rate to 28%, strengthening the global minimum tax for large multinational corporations; reducing incentives for foreign jurisdictions to maintain ultra-low corporate tax rates by encouraging global adoption of robust minimum taxes for large corporations; enacting a 15% minimum tax on book income of large, highly profitable corporations; eliminating incentives for large corporations to offshore profits and jobs and ramping up enforcement to address tax avoidance among large corporations.
Although the Build Back Better agenda was blocked in December, Democrats are aiming to revive the plan, according to NBC News.
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