by Deb Cupples | Based on IRS records, a recent GAO report indicates that many corporations claimed to owe $0 in U.S. taxes from 1998 - 2005: about 28%-53% of large foreign-controlled and 23%-38% of large U.S.-controlled corporations. [The GAO considers a "large" corporation one with at least $250 million in assets or $50 million in gross receipts.]
This reminded me of a 2004 study by the Center for Tax Justice, which reviewed 275 of the Fortune 500 companies listed at the time. Of those 275 profitable companies, 82 (nearly one-third) of them had paid zero or less in U.S. taxes during at least one year from 2001-2003.
Below, I've listed just the 9 companies that paid zero (or less) in taxes during all three years (2001, 2002, and 2003):
|Pepco Holdings||$725 million||-$432 million||-59.6%|
|ITT||$821 million||-$183 million||-22.3%|
|Unisys||$334 million||-$53 million||-16%|
|Principal Group||$2 billion||-$259 million||-12.8%|
|NCR||$708 million||-$41 million||-5.8%|
|Ryder||$318 million||-$10 million||-3.1%|
|Computer Sciences||$1.3 billion||-$31 million||-2.4%|
|Shaw Group||$276 million||-$6 million||-2.2%|
|Saks||$271 million||-$6 million||-2.2%|
When the study was done, the corporate tax rate was 35% of a company's profits (i.e., 35% of money left over after all company expenses were paid, including executive salaries and bonuses).
According to the study, the 275 companies had combined profits for 2001-03 totaling $1.1 trillion. Just to give you an idea of how much money that is, the U.S. federal budget was roughly $2 trillion in both the 2001 and 2002 fiscal years.
If those 275 companies had paid the statutory 35% tax rate on their $1.1 trillion in profits, we taxpayers would have received about $370 billion. Instead, those companies (and the individuals running them) pocketed $175 billion in tax breaks.
Given that our economy started having trouble in 2001 (after September 11th), our government could have done better things with that $175 billion, such as:
1) Paying down our national debt,
2) Paying for a significant part of the Iraq war, or
3) Giving bigger tax breaks to working families.
Instead, much of that $175 billion likely went toward multi-million-dollar salaries, bonuses and perks for company executives.
So, why did the Bush Administration insist on giving those tax breaks? One purported rationale was that tax breaks would encourage companies to make capital investments (like buying equipment) -- which would generate business for other companies, which would help our nation's economy.
According to the CTJ study, the tax breaks failed to serve their purpose: capital investments for the 275 companies overall declined by 15% from 2001-2003. Think about that next time a politician leads cheers for corporate tax breaks.
I suspect that the failure stemmed, in part, from politicians' giving those tax breaks without actually requiring companies to make a certain amount of capital investments.
Given my interest in government contractors, I couldn't help looking into which of the 9 companies in the table above had received big government contracts. Five of those zero-tax companies were among Government Executive magazine's Top-200 Federal Contractor's list for the fiscal years 2002 and 2003 (I didn't find the list for FY 2001):
|$725 million||- $432 million|
|$2.4 billion||$821 million||- $183 million|
|$1 billion||$334 million||- $53 million|
|$8.6 billion||$1.3 billion||- $31 million|
|$910 million||$276 million||- $6 million|
Note: some of the other 82 companies that paid $0 or less in taxes during at least one year from 2001-03 might have received government contracts. I checked only the 9 companies listed in the first table and only the Top-200 contractors that Government Executive lists.
It's unconscionable that any profitable U.S. company would benefit from tax breaks and loopholes enabling it to pay $0 or less in taxes. That any zero-tax company also received millions (or billions) in tax dollars via government contracts adds massive insult to the taxpayers' injuries.
The typical argument from corporate public-relations people (and corporate-connected politicians) is that tax breaks help our nation's economy by stimulating job creation and investments.
The argument sounds reasonable, but consider some realities our nation has faced since our the Bush Administration pushed for corporate tax breaks: e.g., our unemployment rate has grown, and tens-of-thousands of jobs have been cut or sent overseas.
Those facts, alone, suggest that relying on corporations to patriotically create jobs (simply because that's what our nation needs) hasn't worked very well.
If our politicians truly aim to improve our economy (by stimulating investments and creating jobs), then they should put conditions on the corporate tax breaks: i.e., we'll give you X-million dollars in tax breaks if you create X-number of jobs.
I suspect that our politicians have repeatedly failed to attach appropriate conditions, because many of them take large campaign donations from corporate-tied people -- i.e., from people who prefer to get their tax breaks without strings attached.
Wouldn't it be great if we ordinary taxpayers could reduce our tax bills by simply donating to politicians and submitting wish lists?