Corporations Are So Much Better At Not Paying Taxes Than You

Whatever, its only money.

That General Electric managed to essentially pay no taxes in 2010 (despite $5.1 billion in profits) is old news—so it is not surprising, but is incredibly disheartening, to learn that GE is far from alone in finding ways around U.S. tax law. A study out today from the group Citizens for Tax Justice shows that between 2008 and 2010, 30 companies managed to pay no federal income tax, despite earning a combined $160.3 billion in profits. Good thing House Ways and Means committee chairman Dave Camp (R-MI) wants to rewrite the tax code so the top corporate tax rate is 25 percent (down from 35), right?

According to the report [PDF]:

A quarter of the 280 companies studied owed less than 10 percent of their profits in federal income taxes.
40 percent paid an effective tax rate of less than 17.5 percent after claiming deductions and credits.
Another quarter of the companies less skilled in the accounting dark arts paid an effective tax rate exceeding 30 percent.
In addition to those 30 who didn't pay a dime the whole time, 78 of the companies enjoyed at least one year in which their federal income tax was zero.

Another interesting fact—and a blow to pundits who say that we need to lower the corporate tax to better attract more businesses—according to the report those U.S. corporations with "significant foreign profits paid tax rates to foreign countries that were almost a third higher than they paid to the IRS on their domestic profits."

The biggest winner in the corporate tax game appears to be Wells Fargo, which got nearly $18 billion in tax breaks over the last three years, while Pepco Holdings had the lowest effective tax rate (negative 57.6 percent) over the same period. Wells Fargo says that its savings came from write-offs for its 2008 purchase of Wachovia. Other companies who pulled some interesting tricks include FedEx, whose effective tax rate of 0.9 percent is remarkable compared to UPS's 24.1 percent rate, and Amazon, which paid far less than most other retailers with an effective rate of 7.9 percent.

In 2010, corporations paid a total of $191 billion in federal income taxes, representing about 1.3 percent of the nation's gross domestic product. In the 1950s that number was 6 percent. Corporation: they're just like us—only with much, much, much better accountants.

Contact the author of this article or email tips@gothamist.com with further questions, comments or tips.

By Garth Johnston in News on November 3, 2011 2:22 PM

Comments [rss]

chris8lee

A corporation is a 'fictional person' owned by natural persons. If the "natural persons" who own it pay taxes, why should they pay twice?

winning1234

ppl just dont understand taxes - including Obama.

Yuan Yi Peng

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Please Google:

Tragedy of Labor Rights Repression in IBM China
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winning1234

Do ppl not realize that whatever the corporations don't pay in taxes is available to reinvest in the corporation (i.e. creating jobs)?

Iceman_v_1

They also pay dividends. Right now, shares of GE stock are paying a 3.6% annual dividend, which is a lot!

Dead Himmler

That is a very simpleton view. Everybody who studies the markets know that companies do not base their hiring decisions on their tax situation.

winning1234

I'm not saying hiring is based on tax. I'm saying hiring is based on how much money the company has. Lower taxes = more cash.

petey2

So is Charles Rangel, but they keep electing him.

Iceman_v_1

Many Americans own GE stock whether they know it or not. Lots of mutual funds hold GE. If you have a 401k plan and are invested in mutual funds, you probably own some GE.

IvoryJive

As a stop gap, couldn't we just cap the total percentage of income a corporation can claim in deductions and credits?

Or on the flipside, if the things they are getting credits for are actually good for the nation and generating public value, maybe there is no problem? Maybe it's proof the incentive system is working.

kevd

While plausible... GE is mostly a financial services company now.
Oh, and nuclear warheads. They make some of the best.

xXxMExXx

General Electric used “green” investment loopholes to offset their tax burden… But I suspect THOSE loopholes are OK with Garth.

theevilerone

The study didn't look at any of these company's actual tax returns. They looked at their 10-K's. GAAP tax benefit/expense is not the same as how much someone actually pays. But why ruin a good story with facts.

remyngtin

these dolts don't understand cash flow statements from balance sheets ... why expect decent press coverage

Pavel

That makes even less sense, GE 10K is showing $1B tax expense. In the long run, book and tax should be the same anyway.

ChicagoD

I am not looking at the 10K but GE would have property taxes, withholding taxes, state income taxes, potentially Customs duties etc. etc. under "taxes" wouldn't they? That is all different from income tax.

Pavel

Those are costs of doing business or expenses you take out against revenue to calculate profit. Companies pay taxes on profit, which is what the "tax expense" on the income statement is.

This is honestly a non-story for anyone that has a leas bit background in accounting. Fundamentally if you make $5 in year 1 and lose $5 next year, you're no better off than when you started and thus should owe or have paid no income taxes (since you really had no income over the 2 years). That's the impetus for being able to write off past losses with tax loss carry forwards.

robingee

Heeeeeeeeere come the excuse-makers!

But but but but but but...

Pavel

Err their income statement is showing $1B tax expense, which means they must've had tax loss carry forwards, just like regular tax payers. Non-story.

If you lose more money one year, you can take off the profit next Both people and legal entities.

http://finance.yahoo.com/q/is?...
http://www.irs.gov/taxtopics/t...