Check out the new corporate tax system, identical to the old corporate tax system.
This is the inevitable conclusion of a new ITEP report assessing the tax behavior of the most profitable companies in the United States. The report, The corporate tax avoidance remains creeping under the new law, released earlier this week, notes that 60 Fortune 500 companies report paying no federal income tax in 2018, despite significant profits. As a group, these companies generated US $ 79 billion in revenue and collectively benefited from a $ 4.3 billion federal tax rebate. This is a negative average tax rate of 5.5%.
In 2018, 60 profitable Fortune 500 companies avoided all federal income taxes. How did they proceed? Do you have a minute: 30? Matthew Gardner explains.
The report is the latest in a series of extensive surveys conducted by ITEP, which has lasted for decades, and examines companies' annual financial reports to determine whether and how many companies are paying their taxes. In general, many profitable companies manage to reduce their taxes each year and a considerable number of them pay much less than the legal rate. But this year was supposed to be different: the year 2018 was the first year of application of the law on reducing the tax on employment and jobs after Congress and the government Trump had pushed it in a hurry in December 2017. The new law reduced from 35 percent to 21 percent.
This change was partly based on the fact that the old tax rate of 35% had stifled innovation and encouraged tax evasion, and that lowering this rate would reduce tax evasion while triggering a wave of capital investments and hiring. Oh, and the corporate tax cut would also pay off.
Even before most Fortune 500 companies publish their annual financial reports for 2018 in the last two months, it was already clear that most of these claims were whimsical. The Treasury Department announced last fall that corporate tax revenues for the 2018 fiscal year had dropped 31 percent from 2017, the largest decline in the year. a year on the other in the history of the United States outside of a recession. And despite the assertions of business leaders following the adoption of the new law, corporate tax cuts have so far been based on a wave of $ 1 trillion stock buybacks, rather than wave of recruitment and investment we all hoped for.
And now that most Fortune 500 companies have announced their profits and taxes for 2018, it is clear that the new law did nothing to stop corporate tax evasion. The new ITEP report shows that of the Fortune 500 companies that made a profit in 2018, about one in five did not pay a single federal tax on these profits. These companies cover all sectors of the industry, from the Molson Coors beer maker to IBM, from the Amazon retail giant to the oil industry giants such as Chevron and Halliburton.
For all American taxpayers who might feel a bit dissatisfied with paying more than General Motors, Eli Lilly and Deere combined, the way to end this high-profile tax avoidance is extremely clear. This is the path that Congress and President Trump have chosen not to follow in 2017: critically review each of the dozens of expensive tax investments in the corporate tax law, reform those that could be used to one function and repeal the others. It will not be the easiest way to go. The companies described in the new ITEP report will make an intensive effort to keep their share of the tax evasion pie. But this is the only way for legislators who want to put in place a sustainable corporate tax system and are concerned about fairness.