The country’s largest companies dodged more than $275 billion in federal corporate income taxes from 2018 to 2022, a new report from the nonprofit Institute on Taxation and Economic Policy finds.
The report examined corporate income taxes paid by 342 of the country’s largest companies from 2018 to 2022, the latest year for which companies have reported their earnings. All of them were profitable in all five years covered by the report.
Yet the vast majority used loopholes and special tax breaks to pay an effective federal income tax rate well below 21%, the rate they were required to pay on paper. And 109 — or nearly one out of every three — found a way to pay zero federal income taxes in at least one year out of the five. Those same 109 corporations scored $14.34 billion in federal tax rebates over the five year period.
The findings underscore that the 21% corporate tax rate is “a fiction,” said Matt Gardner, the lead author and an ITEP senior fellow — particularly for huge multinationals.
“The companies most successful at doing this international tax evasion dance… have a roomful of lawyers and accountants whose job it is to redefine taxable income, to move income around on paper in a way you hope will avoid taxes.”
Giants like AT&T, Bank of America, Citigroup, Duke Energy, FedEx, General Motors, Molson Coors, Netflix and T-Mobile enjoyed an effective rate of less than 5%. The industries paying the smallest overall tax rates were utilities, fossil fuel companies, car makers, and telecom companies.
All told, the companies in the study paid an average federal income tax rate of 14.1%. But just 25 of them gobbled up $155 billion of the total $275 billion saved by avoiding their full tax bill.
Major companies have leveraged loopholes and tax breaks for years. But the Tax Cuts and Jobs Act, signed in 2017 by then-President Donald Trump, dramatically slashed their starting tax rate to 21% from 35%, giving them a head start on dodging their tax bills.
“People like me were wondering, would there still be this gap between the sticker price of our corporate tax rate and what they actually pay?” Gardner said. “And the gap appears to be just as big as it ever was.”
In the three years after the law passed, 55 major companies, including Dish Network, FedEx, Nike and Salesforce, avoided federal income taxes on more than $40 billion in corporate profits, a previous ITEP report found.
There are opportunities to rein in runaway corporate tax avoidance.
The 2022 Inflation Reduction Act that President Joe Biden signed into law imposed a minimum corporate tax rate of 15% that took effect last year. The tax only applies to companies with a three-year average income of more than $1 billion worldwide.
And in 2021, the Biden administration negotiated a global minimum tax with other world governments, which could prevent multinationals from offshoring their profits in order to avoid taxes in the U.S. But fully implementing the taxes in the United States would require an act of Congress.
The House of Representatives has other plans, such as repealing the very few tax increases imposed in Trump’s Tax Cuts and Jobs Act. A bipartisan tax bill that passed the House in January would retroactively reinstate a tax break for corporate research and development that would cost taxpayers an estimated $34.3 billion.
As with the original Tax Cuts and Jobs Act, a small number of companies would split an enormous share of the savings if this tax break were revived. Microsoft and Meta alone could each net about $6.5 billion.