Did you ever wonder how big corporations like General Motors, Citigroup, and Netflix manage their taxes? Well, a recent report by the Institute on Taxation and Economic Policy (ITEP) has shed some light on this. Turns out, some of the wealthiest companies in America are paying shockingly low taxes, and some are paying none at all!
Economic Boost or Corporate Windfall?
So, what’s the deal? Back in 2017, Trump and his allies pushed through a law called the Tax Cuts and Jobs Act, claiming it would boost the economy and create jobs.
Corporate Income Tax Rate Drops to 21%
The main highlight was dropping the top corporate income tax rate from 35% to 21%.
ITEP Report Unveils Corporate Tax Loopholes
But here’s the kicker: the new ITEP report shows that many big companies found tax loopholes and ended up paying far less than they were supposed to.
Average Tax Rate Plummets to 14.1%
ITEP checked out 342 companies and found out that, on average, they paid only 14.1% in taxes – a lot lower than the 21% everyone thought they’d be paying.
Alarming Findings
Out of those 342 companies, 86 paid less than 10% tax, while 55 paid less than 5%.
23 Companies Pay Zero Federal Income Tax
Even more remarkable is that 23 of these companies, including big firms like T-Mobile US and Xcel Energy, managed to avoid paying any federal income tax at all – even though they made a profit yearly. This has caused considerable outrage.
Corporate Responsibility Under Scrutiny
Some of the companies paying the least are the same ones that talk a big game about corporate responsibility and helping out their communities.
Bank of America’s Profits vs. Tax Contribution
Take Bank of America, for example. Between 2018 and 2022, they raked in over $138 billion in profits. But shockingly, they only paid $5.3 billion in federal income tax during that time.
That’s just a 3.8% tax rate, way less than what your average American pays!
Just Capital’s Ranking
This has frustrated people, particularly as Bank of America was very recently ranked as the second most “fair” company in the United States by a non-profit called Just Capital.
Just Capital checks out how companies handle grassroots issues like helping out their local communities.
Discrepancies in Corporate Practices
Fortune magazine also gave a big thumbs up to Bank of America’s CEO, Brian Moynihan, calling him “the king of stakeholder capitalism,” a concept meaning companies who now focus on not only their CEOs and investors but also on benefiting everyone in society.
Salesforce’s Tax Contribution
And it’s not just them. Salesforce, a company also known for its CEO’s talk about “stakeholder capitalism,” only paid $175 million in taxes on $6 billion in profits during the same period. That’s just a tiny fraction of what they technically should be shelling out.
Legal Maneuvering
However, here’s the thing: these companies aren’t technically breaking the law. They’re just taking advantage of the rules that Congress set up, leaving loopholes wide open for them to take advantage of.
ITEP Report Points Fingers at Lawmakers
The ITEP report makes it clear that it’s Congress’s fault for letting this happen. They either make special rules and breaks for these companies or leave loopholes that everyone knows will be exploited.
Bipartisan Tax Package
And it’s not getting better. There’s a bipartisan tax package making its way through Congress right now that includes some pretty big tax breaks for businesses.
“Research and Development” Savings
One of these deals would let businesses instantly write off the costs of “research and development” in the U.S.
Retroactive Deductions
Trump’s tax law originally made companies spread these deductions out over time, starting in 2022. But the new deal would let them go back in time and get billions in deductions retroactively.
Concerns at ITEP
What’s concerning activists at ITEP is that this tweak in the law could save some companies billions, yet the benefits would mostly go to a tiny group of mega-corporations.
Meta and Microsoft Could Cut Tax Bills by Billions
For example, Meta could cut its tax bill by nearly $6.5 billion, and Microsoft might save a similar amount.
Activists’ Call for Scrutiny
ITEP argues that lawmakers need to dig deeper and figure out if this tax break is really helping the kind of “research” that regular citizens would agree is worth getting a subsidy through the tax code.
Do Tax Breaks Align With Public Values?
The report states, “Most people would probably reject the idea that Nike should receive a tax break for figuring out how to produce more comfortable shoes, or that Chipotle or Campbell Soup should receive this tax break for researching ways to modify their foods. But these are examples of companies that claimed to be affected by the R&D provision.”
ITEP Report Author’s Stance
Lead author of the ITEP report, Matt Gardner, emphasized the societal impact of these tax breaks, stating, “The whole point of having a tax system is to pay for all the important services that we need.”
Growing Calls for Reform
In light of this report, calls for comprehensive tax reform that promotes fairness, transparency, and accountability have grown louder. Only time will tell whether the government will heed these calls.
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