As pro-business interest groups bristle at proposed corporate tax increases to pay for President Biden’s $2 trillion infrastructure plan, a new report has found that dozens of major U.S. Companies paid no taxes on their profits in 2020.
According to the Institute on Taxation and Economic Policy (ITEP), no fewer than 55 publicly traded firms avoided federal income taxes last year, despite reporting nearly $40.5 billion in combined pre-tax profits. That group consists of major S&P 500 and Coins2Day 500 companies from a diverse variety of sectors and industries, including the likes of Nike, Salesforce, FedEx, and Archer Daniels Midland.
Of those 55 companies, 26 were identified by ITEP as having paid no federal income taxes for three consecutive years—despite having reported profits in each of those years, and a combined $77 billion in earnings over that three-year span.
While noting that major U.S. Corporations have found loopholes sheltering their profits from federal taxes “for decades,” the left-leaning think tank cited the Trump administration’s Tax Cuts and Jobs Act of 2017 as having “failed to address loopholes that enable tax dodging—and may have made [them] worse.”
That bill, which slashed the corporate tax rate to 21% from 35% previously, included a provision allowing companies to immediately write off the cost of capital investments in equipment via “accelerated depreciation,” enabling many companies to reduce their tax liabilities. ITEP also said “more than a dozen” firms used a tax break on executive stock options to lessen their taxes owed, while half a dozen deployed a federal research and experimentation (R&E) tax credit and several energy and utility companies relied on renewable energy tax breaks.
Last year’s $2.2 trillion CARES Act coronavirus relief bill also provided a new avenue for tax avoidance, according to ITEP, by including a provision allowing corporations to “carry back” losses to offset taxable profits in previous years. The think tank estimated that the 55 companies that avoided federal income taxes in 2020 “enjoyed at least $500 million of tax brakes last year from the CARES Act provision liberalizing loss carrybacks.”
If those 55 companies had paid the statutory 21% corporate tax rate on their 2020 profits, their collective tax bill last year would have amounted to $8.5 billion, ITEP said. Instead, they received a combined $3.5 billion in tax rebates.
The think tank’s report comes after President Biden this week unveiled his $2 trillion infrastructure proposal, which outlined plans to increase the corporate tax rate to 28% and raise taxes on U.S. Companies’ foreign profits as a means of paying for the bill’s expansive spending measures.
Those proposed tax hikes were greeted with a backlash among business interest groups like the U.S. Chamber of Commerce and the Business Roundtable, which said they would prove counteractive to the infrastructure bill’s goal of spurring job creation and economic growth.