Thirty companies paid no U.S. income tax 2008-2010: report

Thu Nov 3, 2011 1:56pm EDT

A faded, painted  logo sits over the entrance to a General Electric Co. facility in Medford, Massachusetts July 17, 2009.    REUTERS/Brian Snyder

A faded, painted logo sits over the entrance to a General Electric Co. facility in Medford, Massachusetts July 17, 2009.

Credit: Reuters/Brian Snyder

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(Reuters) - Thirty large and profitable U.S. corporations paid no income taxes in 2008 through 2010, said a study on Thursday that arrives as Congress faces rising demands for tax reform but seems unable or unwilling to act.

Pepco Holdings Inc, a Washington, D.C.-area power company, had the lowest effective tax rate, at negative 57.6 percent, among the 280 Fortune 500 companies studied.

The statutory U.S. corporate income tax rate is 35 percent, one of the highest in the world; but over the 2008-2010 period, very few of the companies studied paid it, said the report.

The average effective tax rate for the companies over the period was 18.5 percent, said Citizens for Tax Justice and the Institute on Taxation and Economic Policy, both think tanks.

Their report also listed General Electric Co, Paccar Inc, PG&E Corp, Computer Sciences Corp, Boeing Co and NiSource Inc as among the 30 that paid no taxes.

(For a related graphic, click on r.reuters.com/ryb84s).

Corporations will say rightly that the loopholes that let them slash their taxes were perfectly legal, the report said.

"But that does not mean that low-tax corporations bear no responsibility ... The laws were not enacted in a vacuum; they were adopted in response to relentless corporate lobbying, threats and campaign support," the report said.

Some of the 30 companies disputed the report's findings.

A Pepco spokesman said it "pays all its required taxes."

Boeing paid its taxes "between 2008-2010 ... Our effective income tax rate was 26.5 percent, 22.9 percent, 33.6 percent in 2010, 2009, 2008," said a spokesman for the aerospace group.

PRESSING FOR MORE

As Congress and the Obama administration struggle with a sluggish economy and high deficits, corporations are pressing Capitol Hill for more tax breaks and a lower corporate rate.

Taxes are on the agenda of the congressional "super committee" tasked with finding at least $1.2 trillion in additional budget savings by November 23, but it is so far deadlocked across a familiar divide -- Republicans refusing any tax increases, Democrats defending social programs.

On Tuesday, a panel of budget experts warned super committee members they would fail the country if they did not meet their goal. Financial markets have been waiting for many months for signs that Washington can get its financial house in order, but few have been forthcoming.

The report referred back to the 1986 tax reform pushed through by President Ronald Reagan, a Republican, who approved the largest corporate tax increase in U.S. history, largely by ending tax breaks, while cutting individual tax rates.

"Reagan solved the problem by sweeping away corporate tax loopholes," said the report, which was coauthored by Citizens for Tax Justice chief Robert McIntyre. His research 25 years ago played a key role in convincing Reagan reform was needed.

The industrial machinery business enjoyed the lowest effective tax rate during the study period, while the highest rate was paid by healthcare companies, the report said.

"Big Business is getting away with taxation murder," said Frank Knapp, vice chairman of the American Sustainable Business Council, a progressive business coalition.

"They pay little or no taxes on massive U.S. profits and then have the gall to lobby for ... a tax holiday to 'repatriate' profits they have stashed offshore."

MANY TAX BREAKS

What are some of the tax breaks that corporations enjoy? One big one is accelerated depreciation that lets them write off equipment faster than it actually wears out. Deductions on executive stock options help. So do tax breaks for research and development and for making products in the United States instead of overseas. Offshore tax shelters play a role, too.

Power group Duke Energy Corp was one of the 30 companies listed as paying no income taxes in 2008-2010.

Chief Executive James Rogers told Reuters that Duke cut its taxes thanks to accelerated depreciation, which he said helped the company build new plants and hire construction workers.

Rogers is a frequent spokesman for a coalition of large multinationals seeking a tax break that would let them bring foreign profits into the United States at a reduced tax rate.

Others among the 30 companies included power producer American Electric Power Co Inc (AEP), chemicals company DuPont and toymaker Mattel Inc.

Like Duke, AEP said it benefited from accelerated depreciation. A Mattel spokesperson said the report's claims were inconsistent with the company's public financial filings.

"DuPont complies with all tax laws and regulations in every jurisdiction in which it operates," said a DuPont spokeswoman.

The average effective corporate tax rate, as calculated by McIntyre's group, was about 14 percent before the Reagan reforms; afterward it shot up to 26.5 percent in 1988.

As companies found their way around the reforms, the effective rate fell back to about 17 percent by 2002-2003.

Unlike in Reagan's time, taming corporate tax breaks alone will not solve the deficit problem. Such breaks cost the government about $102 billion in lost revenues in 2011, a year when the federal deficit was an estimated $1.3 trillion.

Corporate loopholes are dwarfed by tax breaks that benefit individuals, such as the mortgage interest tax deduction -- a middle class sacred cow, on its own worth $104 billion.

Still, said the report: "If we are going to get our nation's fiscal house in order, increasing corporate income taxes should play an important role."

(Additional reporting by Matt Daily, Ernest Scheyder, Dhanya Skariachan in New York; Kyle Peterson in Chicago, editing by Gerald E. McCormick)

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Comments (7)
DrJJJJ wrote:
51% of America paid no Fed taxes too! How many are working uinder the table and collecting handouts-20%? You want radical change, taxes every year from these corporations-I do! We need a falt/fair tax model, the 65,00 page tax code that favors the rich in every way and funds 50,000+ IRS to chase us around is a National disgrace! All will need to pay more taxes, will need to make deep cuts and it’ll still take years to knock down just our dficit alone! Yes, there will be fewer jobs too-so get lean and motivated or suffer!

Nov 03, 2011 1:09pm EDT  --  Report as abuse
USAPragmatist wrote:
Well that did not take long, as I read article I knew some rightie would bring out the tired old ’50 something % of people do not pay taxes’, but in the first post, good job DrJJJJ you win today’s ‘Rightie Parrot Award’.

1. 53% do not pay INCOME taxes, but they do pay FICA, sales, gas, local, etc.

2. This 53% do not make enough money to pay income taxes, while this are large and VERY profitable corporations.

Plus the flat tax is a simple idea for simple minds, in actuality it would help out the rich/big corporations MORE then the current tax code.

Ok now that I had to waste 5 mins. dispelling that whole myth/lie, back to point of article….

Is not it obvious that we need serious tax loophole reform? What you have to ask yourselves is why we have not had it? IMO, the answer can be attributed to the money and politics and the influence oft he Grover Norquist’s of the world. Implement serious campaign finance reform and anti-lobbying laws. Congress does not represent the people, they represent the money right now.

Nov 03, 2011 1:26pm EDT  --  Report as abuse
The fact that these companies effectively paid only half the 35% tax rate is exactly the reason Congress needs to reform the corporate tax code.

These companies don’t pay the stated tax rate because of tax deductions and credits. If Congress were to get rid of these tax expenditures they could lower the rate in a revenue-neutral manner. These changes will create a more transparent and simpler tax code that encourages companies to develop and create jobs in the U.S. instead of another, less consumer-driven country. http://eng.am/mTCnZw

Think about it this way. A business goes to the hardware store (U.S. Government) to buy a hammer but with $35 price tag thought it was too costly, decided not to buy it, and started looking for a cheaper option. What the business doesn’t know is that when at the checkout the hardware store would have given them a credit reducing the price to $25 which the business would have been willing to pay. If the store had just put the $25 tag on the item in the first place the company wouldn’t have hesitated to buy it.

Unfortunately our corporate tax code is designed exactly like the hardware store’s pricing system instead of being straightforward. If we don’t reform the corporate system then businesses will continue to overlook investing in America because they are scared of our uncompetitive tax rates like the $35 hammer.

Nov 03, 2011 4:45pm EDT  --  Report as abuse
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