Citizens for Tax Justice has released a preview of its forthcoming major study of Fortune 500 companies and the taxes they paid — or failed to pay — over the 2008-10 period.
The preview details the pretax U.S. profits, federal taxes paid and effective tax rates of (in alphabetical order): American Electric Power, Boeing, Dupont, Exxon Mobil, FedEx, General Electric, Honeywell International, IBM, United Technologies, Verizon Communications, Wells Fargo and Yahoo. CTJ’s full corporate report is scheduled for release this summer.
From 2008 through 2010, these 12 companies reported $171 billion in pretax U.S. profits. But as a group, their federal income taxes were negative: –$2.5 billion.
Read the report in pdf
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Previous CTJ Reports Resulted in Higher Taxes on Corporations Overall
CTJ's reports on corporate taxes have a history of changing the debate in Washington concerning tax reform. One of the news reports published this week puts it this way:
"As a liberal tax-code activist, Robert McIntyre shocked Washington in 1984 when he revealed that General Electric was one of 17 companies that paid no U.S. corporate taxes for three straight years. The finding by McIntyre's organization, Citizens for Tax Justice, sparked national outrage that helped pave the way for The Tax Reform Act of 1986. That landmark legislation eliminated tax loopholes to broaden the tax base while also lowering the corporate tax rate. It also increased corporate tax revenue flowing into the Treasury by 34 percent."
Increasing Clamor for Revenue-Positive Corporate Tax Reform
Meanwhile, 250 organizations, including organizations from every state, have signed a statement calling on Congress to enact a corporate tax reform that raises revenue.
This differs sharply from calls by President Obama and Treasury Secretary Geithner for “revenue-neutral” corporate tax reform. The Obama administration is expected to release a plan for “revenue-neutral” corporate tax reform at some point after the debate over the debt ceiling is resolved.
As the letter explains, “Some lawmakers have proposed to eliminate corporate tax subsidies and use all of the resulting revenue savings to pay for a reduction in the corporate income tax rate. In contrast, we strongly believe most, if not all, of the revenue saved from eliminating corporate tax subsidies should go towards deficit reduction and towards creating the healthy, educated workforce and sound infrastructure that will make our nation more competitive.”
Corporations Attempt to Explain Away Their Tax Avoidance
Corporate leaders are expected to defend the low or negative tax liability of the companies they lead.
When CTJ identified Honeywell as a tax dodger in April, the company wrote to CTJ explaining that its tax avoidance was legal. CTJ replied that this is our point entirely: The laws allowing corporations to avoid tax liability are outrageous and must be fixed by Congress.
Other attempts by corporate leaders to defend their tax avoidance are equally weak. GE, for example, says that its federal taxes are so low because its financing division, GE Capital, lost billions of dollars in recent years.
Of course, this answer is no answer at all. If GE as a whole has profits, why should it pay no taxes because one division had losses?
As one Congressional staffer recently commented to us, "Saying GE would have positive tax liability if we didn't count GE Capital is like saying AIG would be perfectly sound if we didn't count AIGFP." (AIG Financial Products is the subsidiary that brought down AIG by gambling on credit default swaps, trigging the first bailout by the Bush administration.)
What makes GE's explanation even more ridiculous is that GE Capital is the subsidiary that engages in leasing schemes that have the main purpose of lowering GE's overall tax liability.
Influence of Corporate Leaders on Obama Administration Questioned
Tax avoidance by these corporations is bad enough, but it's particularly alarming when the CEOs of the companies in question have such an outsized influence on federal policy.
For example, GE's CEO, Jeffrey Immelt, is the chair of the President’s Council on Jobs and Competitiveness, which is to advise the White House on economic policy.
Honeywell's CEO, Dave Cote, was a member of the National Commission on Fiscal Responsibility and Reform. The plan supported by Cote and a majority of the commission members would reform the tax system but the corporate tax component of the plan is, at best, revenue-neutral.