Paul L. Caron
Dean


Tuesday, April 16, 2019

60 Fortune 500 Companies Paid Zero Federal Taxes (100% More Than Last Year)

New York Times op-ed:  Their Tax Rate Is 0%, by  David Leonhardt:

Amazon. Delta Air Lines. Chevron. IBM. General Motors. Molson Coors. Eli Lilly.

What do these companies have in common? They paid no federal taxes last year.

Thanks to President Trump’s 2017 tax law, the number of Fortune 500 companies that pay no federal taxes roughly doubled last year, to 60, according to an analysis by the Institute on Taxation and Economic Policy, a research group [60 Profitable Fortune 500 Companies Avoided All Federal Income Taxes in 2018]. Some of them effectively paid negative taxes, because they received a refund.

The number of companies paying no taxes has risen for two main reasons. First, the Trump tax law expanded some corporate tax breaks, such as the one for the purchase of machinery and vehicles. Second, the law reduced the top-line corporate tax rate, which means that some companies now have a low enough tax bill that they can wipe it out entirely with tax breaks.

Altogether, the law led to a 31 percent decline in corporate-tax revenue last year. That decline has helped cause an increase in the deficit. As the law professors Rebecca Kysar and Linda Sugin have written [The Built-In Instability of the G.O.P.’s Tax Bill], the Trump tax cut is financed “on the backs of future generations.” ...

I think some decline in the top-line corporate-tax rate — which was higher than in most other countries — was justified. But the Trump tax cut didn’t go about it in the right way. It cut the rate too steeply and kept, or expanded, too many tax breaks.

https://taxprof.typepad.com/taxprof_blog/2019/04/60-fortune-500-companies-paid-zero-federal-taxes-100-more-than-last-year.html

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Comments

"Some of them effectively paid negative taxes, because they received a refund."

How dumb is that statement? Sounds just those ignorant taxpayers who brag they paid no taxes because "I got a refund".
Sheesh!

Posted by: John | Apr 17, 2019 4:49:07 AM

@John - Although the "received a refund" language in the article is inaccurate, it is not referring to companies receiving a refund because they made payments in excess of their liabilities (which would fit your analogy to individual taxpayers). Rather, since the underlying analysis cited in the article was based on financial statement taxes reported by the companies, the "refund" terminology instead refers to companies that generated a negative tax liability for the year (i.e., a net tax benefit) because the tax benefits for which they qualified exceeded their liability. On a current basis, this would result in a carryforward of the relevant tax attributes (net operating loss, credits, etc.) and not in a refund, since tax reform eliminated in almost all cases the ability to carry such attributes back to a prior year and receive a refund. While it is fair to quibble about whether this is "effectively pa[ying] negative taxes" and it is certainly not "receiv[ing] a refund," it does line up with the basic premise of the article and is not analogous to receiving a refund because you are overpaid.

Posted by: Matt | Apr 18, 2019 11:58:25 AM