More Big Companies Paying No Taxes

USA Today has a report on the companies on the S&P 500, more than 10% of which paid no federal taxes.

A surprising number of companies in the Standard & Poor’s 500, 57, have found ways to pay effective tax rates of zero, according to a USA TODAY analysis of data from S&P Capital IQ…

The news comes months after after the Government Accountability Office released a report showing that companies in 2010 reported an average effective tax rate of 12.6%, well below the 35% federal corporate tax rate.

This includes some large corporations you would certainly recognize, like Verizon and Bristol-Myers Squibb. Here’s one way they do it:

One of the favorite ways for companies to slash their tax bills is by setting up foreign subsidiaries to make raw materials and components in countries with low tax rates. The companies’ U.S. operations then purchase these parts from the foreign units at well above cost. By doing this, the overseas unit makes a large profit, which then escapes U.S. taxes, as long as it stays in the foreign country, Yee says. Transfer payments are used at Bristol, Forest Labs, Agilent Technologies, Eaton and Lam Research, he says. Many companies are likely waiting for a U.S. tax-holiday, giving them a chance to bring the cash to the U.S. tax-free, Yee says.

This is part of a long-term shift in the tax burden from corporations to individuals. In 1955, 27.3% of federal revenue came from corporate income taxes; today it’s 8.9%, with two-thirds of all corporations paying no income taxes at all and some of the largest and most profitable companies actually getting taxpayer money transferred to them rather than paying in. As a percentage of GDP, in 1955 corporate taxes were 4.3%; today they are 1.3%. Personal income taxes, on the other hand, have gone from 58% of federal revenue to 81.5%.

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  • cswella

    Eternally frustrating that as minimum wage hasn’t increased significantly, the cost of living has gone up, and the burden for supporting the USA has been slowly pushed off onto individuals who aren’t making money.

  • Trebuchet

    The ability of the Republican Party to convince the Tea Partiers, most of whom are relatively low income, that increasing corporate taxes would be bad for them is truly one of the wonders of the age.

  • cry4turtles

    Seeing red.

  • rationalinks

    Well there are way more jobs today than in 1955, so obviously lowering the corporate tax rate to almost nothing has had its intended effect. Why do you hate America and the Job Creators?


  • DonDueed

    One of the names on the list of companies with an effective tax rate of 0%: News Corp.

    The parent company of Fox “News” and the WSJ, perpetual whiners about high taxes, pays no taxes.

  • Michael Heath

    What really chaps my ass is that corporations are able to continue heavily influence policy, in spite of their becoming a dwindling source of revenue.

  • cry4turtles

    Representation without taxation.

  • justawriter

    One more reason we need better historians. I remember a debate in the Reagan Administration demanding “water’s edge” taxation that basically set an artificial boundary of a company’s profits created domestically and overseas. The general rationalization, if I remember (it was after all, long, long ago in a country Far, Far, Away), that it was “unfair” to look at corporations as a whole rather than a hundred different corporations chartered under different national governments. Those of us arguing against it said balance sheets would be rigged to avoid taxation in the US, which was poo-pooed by the other side. Now we can say that we were right, but since almost no one remembers or cares about 30 year old tax law debates, there is little chance of moving back to a more sane corporate tax system.

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