Indiana-based Carrier Corporation and its parent, United Technologies (UTX), are drawing the well-deserved ire of presidential candidate Donald Trump after announcing that Carrier will move 2,100 jobs from Indiana to Mexico next year. Indiana Governor Mike Pence reportedly is assigning part of the blame for Carrier’s move to our nation’s “high federal corporate tax rates.”
But a quick look at United Technologies’ taxpayer profile suggests that the company is already quite adept at avoiding federal income taxes. Over the past fifteen years, the company has enjoyed $38 billion in U.S. pretax income and has paid a federal tax rate averaging just 10.3 percent during that period—which means that the company is consistently finding ways to shelter more than two-thirds of its U.S. profits from federal taxes.
Indiana Senator Joe Donnelley and Governor Pence are sensibly upset that Carrier raked in federal and state tax incentives for job creation before announcing this move. And United Technologies has benefitted, big-time, from the largesse of the federal government in the past: the company was the seventh largest federal contractor in 2014, enjoying almost $6 billion of federal contracts in that year alone. Even more troubling to Governor Pence should be the fact that last year, the company didn’t pay even a dime of state income taxes on its $2.7 billion in U.S. profits.
If this move seems profoundly unpatriotic, it shouldn’t be surprising: United Technologies has been more aggressive than almost all other Fortune 500 corporations in shifting its profits, on paper, into foreign jurisdictions. The company now claims to hold a staggering $29 billion of its profits abroad—that’s one out of every three dollars the company has earned over the past fifteen years. The company’s limited financial disclosures make it impossible to know how precisely much of these profits have been assigned to UTX’s tax haven subsidiaries in the Cayman Islands, Luxembourg, or Gibraltar—or whether the company has paid any tax on these offshore profits.
If Carrier and UTX go ahead with their plans to shift thousands of jobs to Mexico, the local economic effect on Hoosiers will be potentially devastating. But the company’s long history of avoiding federal and state income taxes makes it clear that this move wouldn’t be driven by our tax laws.