While the federal corporate tax code ostensibly requires big corporations to pay a 35 percent corporate income tax rate, on average, the 280 corporations in our study paid only about half that amount. And many paid far less, including a number that paid nothing at all. [...]Many people will be appalled to learn that a quarter of the companies in our study paid effective federal tax rates on their U.S. profits of less than 10 percent. Others may be surprised to learn that an almost equal number of our companies paid close to the full 35 percent official corporate tax rate.
The average effective tax rate for the 280 companies was 18.5 percent, but the range is surprising: 30 companies paid a negative effective tax rate over the three years, while 71 companies paid effective rates of over 70 percent. Note that this isn't because those companies made no money: members of the negative-tax club include General Electric and ... well, and a phalanx of financial, energy and telecommunications companies.
Over the 2008-10 period, our 280 companies earned almost $1.4 trillion in pretax profits in the United States. Had all of those profits been reported to the IRS and taxed at the statutory 35 percent corporate tax rate, then the 280 companies would have paid $473billion in income taxes over the three years. But instead, the companies as a group paid only about half that amount. The enormous amount they did not pay was due to the hundreds of billions of dollars in tax subsidies that they enjoyed. [...]More than half of the total tax- subsidy dollars over the three years — $114.8 billion — went to just 25 companies, each with more than $1.9 billion in tax subsidies.
This, perhaps, comes closest to summarizing the current situation:
Notably, 56 percent of the total tax subsidies went to just four industries: financial, utilities, tele-communications, and oil, gas & pipelines.
So while people often claim that the financial and oil industries are exceptionally heavy feeders at the government trough, this would seem to provide hard evidence. If over half of all corporate tax subsidies are going to the financial, tele/utility and oil/gas sectors, that seems a rather dramatic tilt in favor of those particular, heavily-lobbying industries.
It may surprise you that the financial sector, of all things, is the recipient of such government largesse. After all, most people are familiar with government efforts to subsidize oil production: what on earth are we subsidizing, on Wall Street?
While the report doesn't break it down by industry, it does single out a few of the popular tax avoidance strategies. This one seems rather solvable, if you ask me:
Most big corporations give their executives (and sometimes other employees) options to buy the company's stock at a favorable price in the future. When those options are exercised, companies can take a tax deduction for the difference between what the employees pay for the stock and what it's worth (while employees report this difference as taxable wages).13 Paying executives with options took off in the mid-1990s, in part because this kind of compensation was exempt from a law enacted in 1993 that tried to reduce income inequality by limiting corporate deductions for executive pay to $1 million per executive. [...]All right then. There's a place to start.Of our 280 corporations, 185 reported "excess stock-option tax benefits" over the 2008-10 period, which lowered their taxes by a total of $12.3 billion over three years. The benefits ranged from as high as $1.5 billion for Apple over the three years to tiny amounts for a few companies. Just 25 companies enjoyed almost two-thirds of the total excess tax benefits from stock options received by all of our 280 companies, getting $8.1 billion of the $12.3 billion total.
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