Most tax avoiders continue in same vein
Of the 30 U.S. companies that paid no net federal income tax on U.S. profits from 2008 through 2010, 26 remained in that category over the 2008-11 period.
Federal income tax rates on U.S. profits, 2008-11
Pepco Holdings –39.5%
General Electric –18.9%
PG&E Corp. –18.4%
Wisconsin Energy –13.2%
Integrys Energy Group –11.6%
CenterPoint Energy –11.3%
Atmos Energy –9.6%
Tenet Healthcare –8.2%
American Electric Power –6.4%
Ryder System –5.4%
Verizon Communications –3.8%
Duke Energy –3.5%
Interpublic Group –2.5%
NextEra Energy –2.0%
CMS Energy –1.4%
Navistar International –1.3%
Consolidated Edison –1.3%
El Paso –0.9%
Baxter International –0.6%
DTE Energy 0.2%
Honeywell International 2.0%
Wells Fargo 3.8%
Weighted average for all 30 companies –3.1%
Sources: Citizens for Tax Justice and the Institute on Taxation and Economic Policy
It's tax time for most of us, but not for some of the nation's biggest, most profitable corporations. If modern trend lines hold, and there is no reason they shouldn't, dozens of Fortune 500 corporations will pay no federal income taxes even as they make dizzying profits.
You, fellow taxpayers, are making up for all the federal taxes General Electric has been avoiding. You're also spotting Boeing, Verizon Communications and Duke Energy (owner of Progress Energy), just to name a few.
A study by Citizens for Tax Justice — thank goodness there are organizations that do this kind of work — found that 30 consistently profitable major U.S. corporations paid no net federal income tax from 2008 through 2010. And of those 30, 26 enjoyed a negative federal income tax rate again in 2011.
In one notorious though not unique example, GE took in more than $19 billion in U.S. profits from 2008 through 2011, yet paid no net federal income taxes while taxpayers gave it $3.7 billion in tax subsidies. (GE did pay some federal income taxes in 2012.)
Maybe that is not technically treasonous (and sadly it's not technically illegal, either) but the phrase "disloyal to country" springs to mind. Think of all the lost opportunities for public investments in infrastructure and education or, for that matter, the lost deficit reduction because giant corporations don't pay their fair share of taxes.
America's class war isn't just between the top 1 percent and the remaining 99 percent. It is also between taxpayers and corporations that mooch off the public treasury. They take all the benefits the country offers, from a legal system that protects contracts to a workforce educated in public schools and universities. Then the ingrates use elaborate tax schemes to avoid paying anything back.
Comically, companies say they are overtaxed, pointing to a statutory corporate income tax rate of 35 percent in the United States, the highest among advanced economies. But the figure is seriously misleading. In reality, U.S. corporations pay below the average of other developed nations in actual taxes as a share of profits.
The smokescreen of the statutory rate obscures another important fairness gauge: Current corporate taxes are extremely low by historical measures. The corporate income tax raised only 1.2 percent of the gross domestic product in 2011. In the 1950s it averaged 4.7 percent of GDP. As a result, corporate income taxes accounted for only 10.7 percent of federal revenues between 2000 and 2009, down from 29.8 percent in the 1950s.
This is the culmination of corporate America using its outsized influence in Washington to keep favored tax loopholes that shift the national tax burden to the rest of us. Meanwhile, one political party would drink poison before fixing this fixed system.
As Bruce Bartlett wrote in the New York Times last year: "When poor people pay no federal income taxes and get a government refund because of such programs as the earned-income tax credit, Republicans are incensed, implying that if only the poor paid their fair share that the deficit would disappear. They never suggest corporations like GE pay their fair share." Bartlett is no woolly-headed liberal; he held senior policy posts in the Reagan and George H.W. Bush administrations.
It's frustrating that President Barack Obama isn't being bolder to right this wrong. Meekly, as if not wanting to rile the U.S. Chamber of Commerce, Obama's proposed budget would only partially close some corporate tax loopholes. The net savings aren't counted toward deficit reduction because Obama has adopted a posture of revenue neutrality on corporate income taxes. His long-term plan is to lower rates.
The problem with revenue neutrality is it rewards the outrageous amount of tax avoidance by major corporations by freezing current revenue levels in place. If Social Security and Medicare recipients are being asked to sacrifice by taking less or paying more, why aren't the nation's corporations?
Tax time shouldn't be so fundamentally unfair.