The current U.S. tax code allows some of the country’s largest companies to file no federal corporate income tax.
In fact, according to the Institute on Taxation and Economic Policy, at least 55 of America’s largest corporations have not paid any federal corporate income tax on their 2020 profits. Companies include Whirlpool, FedEx, Nike, HP and Salesforce.
Matthew Gardner, a senior fellow at the Institute on Taxation and Economic Policy (ITEP), told CNBC: “If a big, very profitable company doesn’t pay federal income tax, we have a real fairness problem.”
What’s more, it is entirely within the parameters of the legal and tax codes that corporations cannot pay any federal corporate income tax, resulting in billions of dollars in lost revenue for the U.S. government.
“[There’s] A bucket of corporate tax breaks that is intentionally included in the tax code. And overall, they cost the federal government about $ 180 billion a year. And by comparison, corporate taxes bring in about $ 370 billion in revenue each year, “Chie-Ching Huang, executive director of the NYU Tax Law Center, told CNBC, citing a study by the Tax Foundation.
CNBC contacted FedEx, Nike, Salesforce and HP for comment. They either refused to provide a statement or did not respond to a request for comment.
The 55 corporations cited by ITEP will pay a total of $ 8.5 billion. Instead, they received a 3.5 billion tax rebate, which collectively excluded মার্কিন 12 billion from the U.S. government, according to the institute. The statistics do not include corporations that do nothing but pay taxes.
“I think the fundamental problem here is that corporations book their profits in two different ways,” Garrett Watson, a senior policy analyst at the Tax Foundation, told CNBC. “The amount of profits that corporations are reporting for financial purposes can be very different from the profits they are reporting. [for tax purposes.]”
Some tax expenditures, which come in different forms, are used by some companies to take advantage of rules that enable them to reduce their effective tax rates.
For example, Gardner’s study of Amazon’s taxes from 2018 to 2021 found that $ 79 billion in pretax revenue. According to Gardner’s ITEP report, about a quarter of the 21% federal corporate tax rate, equivalent to the 5.1% effective annual tax rate, Amazon paid $ 4 billion in federal corporate income tax in those four years.
Amazon told CNBC in a statement, “In 2021, we reported $ 2.3 billion in federal income tax expenditures, $ 5.2 billion in other federal taxes, and more than $ 4 billion in state and all types of local taxes. We also collected an additional $ 22 billion in sales taxes for U.S. states and territories.“
A controversial form of federal tax spending is profit offshoreing. Foreign corporate income tax – between 0% and 10.5% – may encourage the transfer of profits to the tax haven.
Whirlpool, for example, is a U.S. company known for making home appliances in both the United States and Mexico, in a recent case involving taxes from both the U.S. and Mexicans.
“[Whirlpool] The Mexican operation was carried out without any employees owned by a Mexican company and then owned by a Luxembourg holding company owned by a Mexican company that had one employee, “Huang told CNBC. “And then it tried to claim that because of the adjustment to the tax laws of the United States, Mexico and Luxembourg … it was trying to take advantage of the disconnection between these tax systems to avoid taxes and all those countries and courts said, no, it’s too much.” Goes away. “
Whirlpool defended his actions in a statement to CNBC: “Prior to the Sixth Circuit, the lawsuit was not settled out of court in Mexico. This tax dispute has always been about when those profits are taxed in the United States. In fact, a few years before the original tax court decision in 2020, Whirlpool had already paid US tax on 100% of the profits earned in Mexico. Simply put, the IRS thought this US tax should have been paid before Whirlpool. “
Watch the video above to learn how the most profitable companies in the country operate through a complex tax system and what policy solutions can fix some errors.