The stock market boomed last year, despite a pandemic that put 45 million Americans people out of work. But dozens of the biggest, most profitable corporations in the United States still paid $0 in federal taxes, according to a new report.
The nonpartisan Institute on Taxation and Economic Policy found that 55 of the largest firms in the country used a complex roadmap of tax breaks and loopholes to bring their tax bill down to zero, despite turning millions, or even billions in profit. Such relief came from a combination of policies preserved or expanded by President Donald Trump’s 2017 Tax Cuts and Jobs Act, as well as reprieves offered by the CARES Act. The companies reported a collective $40.5 billion in pretax income last year, which would typically mean that—at the corporate tax rate of 21%—they would owe $8.5 billion to the government; however, they managed not just to negate that total, but also to wrangle $3.5 billion in tax rebates.
In doing so, ITEP says, the companies were engaging in a “decades-long” tradition of tax avoidance by the biggest U.S. businesses, dating back to the Reagan era. Those on the list include Nike, which reaped $2.8 billion in 2020; Dish Network, which earned $2.5 billion; Fedex, which earned $1.2 billion; and chipmaker Advanced Micro Devices, which earned $1.2 billion. The report comes as the Biden administration is campaigning to raise taxes on corporate profits to 28%, after the rate was reduced from 35% to 21% by the Tax Cuts and Jobs Act.
Separately, in March, ITEP reported that pandemic superstar Zoom, whose income swelled 4,000% to $660 million last year, also avoided taxes with its use of executive stock options, which is an age-old strategy among profitable firms. Companies that compensate their leadership with stock options can write off those expenses for tax purposes, shaving chunks off their taxable income—a move that ITEP says has “been leveraged effectively by virtually every tech giant in the last decade, from Apple to Facebook to Microsoft.”
All of this is perfectly legal, notes ITEP, so any change must come from Congress. “By paring the tax breaks identified in this report, or by re-introducing some form of a ‘minimum tax’ requiring profitable companies to pay at least some tax in any profitable year, Congress and President Biden could take a major step toward a fairer and more sustainable tax system,” the nonprofit group writes.
That’s similar to what Senator Elizabeth Warren argued last month when she proposed a “bill to make the most profitable companies pay a fair share.” It also echoes, in a funny way, what Amazon told lawmakers last week following criticism of its business model: “If you don’t like the laws you’ve created,” the company wrote on Twitter, “by all means, change them.”