55 Companies Don't Pay a Penny
Biden noted a list of 55 profitable U.S. companies that didn’t pay income taxes in 2020.
“Not a penny and that’s not right. And my economic plan will change that,” said Biden.
List of Profitable Companies Paying No Tax
ITEP provides the List of 55 Companies Paying No Tax.
More than a dozen used a tax break for executive stock options to sharply reduce their income taxes last year. These include Advanced Micro Devices, Archer Daniels Midland, Booz Allen Hamilton, Charter Communications, Nike, and Salesforce.com. This tax break allows companies to write off stock-option related expenses for tax purposes that go far beyond expenses they report to investors.
At least half a dozen companies used the federal research and experimentation (R&E) credit to reduce their income taxes in 2020. These include HP, Nike, Jacobs Engineering, Advanced Micro Devices and Ecolab.
Tax breaks for renewable energy are part of the tax avoidance scheme for several companies, including Qurate Retail, Xcel Energy, DTE, and Duke Energy.
A provision in the Tax Cuts and Jobs Act allowing companies to immediately write off capital investments—the most extreme version of accelerated depreciation—helped several companies reduce their income tax substantially. Consolidated Edison, Williams, PPL and Sealed Air all used depreciation tax breaks to substantially reduce current income tax expense, as did at least a dozen other companies.Ironically, under Biden's plan, the number might rise.
How the CARES Act Creates Zero-Tax Corporations
Besides the standard array of tax breaks described above, the 2020 data introduce a new factor driving down corporate tax bills: the CARES Act, ostensibly designed to help people and businesses to stay afloat during the pandemic. Some companies used a CARES Act provision to “carry back” 2018 or 2019 losses to offset profits they reported in prior years, resulting in a rebate that reduced their 2020 taxes, in some cases to less than nothing.
Still No Taxes Under Democrats’ Plan
Party proposals don’t affect main reasons why profitable companies sometimes report no current U.S. tax costs.
And the number of companies paying no taxes might even increase.
The Wall Street Journal reports Some Profitable Companies Would Still Pay No Taxes Under Democrats’ Plan
The Democratic proposal approved this month by the House Ways and Means Committee would sharply raise taxes on U.S. corporations, and business groups are working hard to defeat it. The legislation would increase the top corporate tax rate to 26.5% from 21% and remove many benefits of booking profits in low-tax foreign countries. That resulting revenue—about $1 trillion over a decade—would help pay for Democratic policy priorities including an expanded child tax credit and a paid-leave program.
The bill, however, doesn’t touch the main reasons why profitable companies sometimes don’t pay taxes, including accelerated depreciation of investments and tax credits for activities such as research and development. The bill does strengthen a minimum tax on U.S. companies’ foreign profits, but it doesn’t include the separate minimum tax that Mr. Biden proposed to limit the number of zero-tax companies.
The legislation also expands tax credits for clean energy and low-income housing in ways that could push some companies from paying little to paying nothing.
“Corporations that don’t pay any taxes are still going to be able to go on paying no taxes, and in some ways they may even get a bigger refund,” said Frank Clemente, executive director of Americans for Tax Fairness, a progressive group that advocates higher taxes. “It is remarkable that there is no talk about this in Congress.”
Actually, it would be remarkable if Congress discussed what's really going on.
Republicans will not moan about tax breaks ever. Democrats are all in favor of protecting pet projects like affordable housing and clean energy.
So why would anyone in Congress be talking about this?
Corporate tax hikes probably will not impact the largest companies much. But they will hit companies that do not have an army of lawyers and lobbyists watching out for them.
It's the way the system works.
If the tax breaks for clean energy go in as expected, then expect a plethora of companies to suddenly do activities that make them look clean.
The irony in all of this is corporations don't pay tax in the first place. Consumers do via higher prices.
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