“Their total corporate tax breaks for 2020, including $8.5 billion in tax avoidance and $3.5 billion in rebates, comes to $12 billion,” according to the study’s authors, Matthew Gardner and Steve Wamhoff.
The findings also underscore the favorable tax environment for big businesses in the wake of the 2017 Trump tax cuts. Twenty-six corporations have paid no federal income taxes since 2017, according to the report, including such household names as Nike, FedEx and Dish Network. Combined, the 26 companies have booked more than $77 billion in profits since 2018, while receiving nearly $5 billion in rebates, for an effective three-year tax rate of negative 6 percent.
“By all appearances, the companies described in this report appear to be using entirely legal means to reduce their tax bills,” lead author Matthew Gardner said via email. But that doesn’t mean the companies are “blameless,” he added. “Many of the tax provisions these companies are using exist because they themselves have lobbied heavily for their creation.”
Those provisions include tax breaks for stock options given to chief executives as part of their pay packages, credits for research and experimentation, and write-offs for renewable energy and capital investments. The 2017 Tax Cuts and Jobs Act’s dramatic cut to the corporate income tax rate, from 35 to 21 percent, also plays a role in the limited tax liabilities facing many major corporations.
But Gardner says the generous carve-outs, not the baseline rate itself, are driving much of the phenomenon.
“We all want to see businesses investing more in the U.S., whether it’s creating productive capacity or just creating jobs,” he said. “Similarly, all Americans want to see businesses engaging in more research and development, and the R&D tax credit is another prominent factor driving the tax avoidance we see here.”
Speaking last month before the Senate Finance Committee, Kimberly A. Clausing, a deputy assistant secretary for tax analysis at the U.S. Treasury, said the Trump tax cuts roughly halved corporate tax revenue as a share of gross domestic product. While other wealthy nations typically raise roughly 3 percent of GDP through corporate taxes, in the United States that share fell to just 1 percent following the 2017 changes to the tax code.
She also noted that before the pandemic, corporate profits as a share to GDP were running roughly twice as high as in the period from 1980 to 2000.
His proposal “wouldn’t directly repeal any tax breaks,” Gardner said, “but would reduce the cost of many existing breaks. If this is what’s politically doable, it’s certainly better than doing nothing at all.”
Biden’s proposal is already generating opposition among business groups. “By significantly increasing taxes on corporations, the proposal would be counterproductive to the goal of increasing economic growth and job creation,” said Business Roundtable chief executive Joshua Bolten in a statement.
However, progressive groups have been supportive of the plan. In a statement, a group of left-leaning think tanks wrote that “robust taxation of corporations and the wealthy can directly counter damaging inequality, rebalance power in our economy, and increase the competitiveness of American workers.”