New Report: Corporations that pay no federal taxes

Posted by AzBlueMeanie:

It's not news to me because I see this kind of data all the time. But to the average American who barely follows the news, this new report by the nonprofit groups Citizens for Tax Justice and the Institute on Taxation and Economic Policy should be a real eye opener. Big corporations use loopholes, dodge taxes: Study – The Washington Post:

Many of this country’s biggest companies paid no federal taxes — or even made money through credits and refunds from the government — over the past three years by using an array of loopholes and tax breaks, according to a report released Thursday.

The authors examined the finances of 280 corporations from 2008 through 2010 and found that 30 paid zero taxes or used loopholes to wind up with negative tax rates. Local utility Pepco Holdings paid the lowest rate of all the firms investigated, clocking in at nearly minus 58 percent.

Under the federal tax code, corporations are supposed to pay 35 percent of their profits in taxes. But the study found many of the companies used legal tax breaks that allowed them to pay lower rates than ordinary Americans.

Powerful business lobbying groups, including the Business Roundtable, have said they want lawmakers to lower the overall 35 percent tax rate in exchange for closing some loopholes. These lobbyists frequently cite this rate when arguing that U.S. firms pay more than their foreign competitors.

The report said that 71 of the companies paid an effective rate of more than 30 percent over the three years. But roughly an equal number paid less than 10 percent.

The range between industries is wide. Retail and health-care companies, in particular, tend to pay more in taxes. These firms usually have less intellectual property that can be shifted overseas to take advantage of other countries’ lower tax rates. The report found they paid an effective rate of 30 percent over the three years.

By contrast, tech companies and manufacturers, including General Electric, paid far less. GE, for instance, paid a rate of minus 45 percent, the report said.

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The report also noted that defense contractors paid notably low rates, averaging about 15 percent.

Gas and electric utilities also tend to pay less. Last year, Pepco Holdings made $229 million in pretax profits, the study said, and claimed $270 million in federal tax credits, making the company’s tax rate about minus 118 percent.

Bob McIntyre, a co-author of the study and director of the Center for Tax Justice, said it was hard to tell from Pepco’s annual financial filings exactly how it managed to lower its taxes by so much. But it appeared that much of the savings came from “accelerated depreciation,” a tax rule that allows companies to write off their capital investments faster than they wear out. Companies then deduct from their taxable income the falling value of these investments.

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The report said that many other companies took advantage of tax breaks that favor certain industries, including drilling for oil and gas, making video games, building NASCAR racetracks, producing ethanol, and making movies.

Combined, the companies examined earned almost $1.4 trillion in pretax profits, according to the study. As a group, however, the firms claimed $223 billion in subsidies, with Wells Fargo, AT&T and Verizon topping the list.

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“We were way overdue for corporate tax reform a decade ago at the least, and nothing has happened in Congress,” McIntyre said. He said the report “shows how the power of these companies has grown over time.”