Recent investor filings by Fortune 100 companies have revealed that 19 of the massive profit-making corporations either paid taxes in single digits or claimed a refund despite earning record profits last year.
Benefitting from the American tax system, according to the Centre for American Progress (CAP) analysis, corporate giants like Amazon, ExxonMobil, Microsoft, JPMorgan Chase, Verizon, FedEx, Ford, General Motors and several others paid less than 10% tax or less than half the federal statutory rate.
On the other hand, companies like AT&T, Charter Communications, American International Group (AIG) and Dow paid negative effective federal income tax rates on their 2021 profits, which amounts to a refund.
According to financial data company FactSet, S&P 500 companies had a 13% profit margin in the second quarter of 2021, the best year for corporate profits since 2008.
According to CAP—an independent, nonpartisan policy institute—several big companies enjoyed effective tax rates of less than 10%. Amazon’s effective federal income tax rate was 6.1% in 2021 with $35.1 billion in US earnings and $2.1 billion in federal income taxes. ExxonMobil’s paid a 2.8% tax despite earning $9.3 billion in US and $236 million in federal income taxes.
Microsoft’s effective federal income tax rate was 9.7% with $33.7 billion in US earnings and $3.3 billion in federal income taxes. JP Morgan Chase’s tax rate was 5.9%with $48.2 billion in US earnings and $2.9 billion in federal income taxes. Verizon’s paid an effective federal income tax rate of 6.9% despite $27.2 billion in US earnings and $1.9 billion in federal income taxes.
Ford’s effective federal income tax rate was 1% in 2021 with $10 billion in US earnings and only $100 million in federal income taxes. GM’s paid an effective federal income tax rate at 0.2% with $9.4 billion in US earnings and only $20 million in federal income taxes. Chevron paid only $174 million in federal income taxes despite earning $9.5 billion last year.
Several mega corporations reported that they will pay no tax at all and even claimed refund. AT&T reported that it will pay no federal income taxes for 2021 despite earning $29.6 billion and claiming a tax refund of $1.2 billion. Similarly, Charter Communications will pay no taxes in 2021 despite earning $6 billion and claiming a refund of $12 million.
The analysis shows that AIG too reported that it will pay no federal income despite $9.8 billion in earnings and also reported a refund of $216 million. Dow Inc won’t pay any taxes either despite $1.5 billion in earnings and also claiming a refund of $46 million.
The list of large companies that paid no taxes is not restricted to the Fortune 100 list. For example, Salesforce paid no federal income taxes in 2021 despite earning $2.7 billion, Duke Energy $3.7 billion and Kinder Morgan $2.2 billion. Netflix, just outside the Fortune 100, paid a meagre 1.1% on $5.3 billion of US earnings.
According to a comprehensive analysis by the Institute for Taxation and Economic Policy (ITEP), former President Donald Trump’s Tax Cuts and Jobs Act, 2017, (TCJA) allowed many companies to pay no taxes in 2020. According to ITEP, 55 profitable companies in the Fortune 500 or S&P 500 paid no federal taxes and 26 paid nothing from 2018 to 2020.
These 26 companies reported $77 billion in pre-tax US income in the first three years of the TCJA and collectively enjoyed a tax rebate of $4.6 billion.
Duke Energy paid, on balance, no federal income taxes on a total of $7.9 billion over the first three years of the TCJA. FedEx achieved the same zero tax result on almost $6.9 billion of U.S. income during the past three years. Nike paid no federal income tax in the TCJA era on $4.1 billion of US pre-tax income.
The tax-avoiding companies represent various industries and collectively enjoyed almost $40.5 billion in US pre-tax income in 2020, according to their annual financial reports. The statutory federal tax rate for corporate profits is 21 percent.
The 55 corporations would have paid a collective total of $8.5 billion for the year had they paid that rate on their 2020 income, the ITEP analysis shows. Instead, they received $3.5 billion in tax rebates. Their total corporate tax breaks for 2020, including $8.5 billion in tax avoidance and $3.5 billion in rebates, comes to $12 billion.
The US charges 21% corporate tax from large companies but these corporations pay a lower effective rate because of the many ways they can reduce their taxable income under the current tax system. These companies use offshore loopholes by shifting their profits to tax havens to avoid US tax.