Largest US companies paying no taxes?

posted at 4:01 pm on October 26, 2013 by Jazz Shaw

This is a story which seems to crop up every couple of years, and I never fail to be amazed at the wide range of frequently contradictory responses that it elicits on both sides of the political aisle. USA Today is out with yet another report on the number of large, profitable companies in the United States which wind up paying an effective tax rate of zero. (Yes… zero)

Despite widespread groans about the recent disclosure that Apple is finding ways to cut its federal tax bill, an analysis shows the computer giant is one of scores of corporations largely dodging the taxman.

A surprising number of companies in the Standard & Poor’s 500, 57, have found ways to pay effective tax rates of zero, according to a USA TODAY analysis of data from S&P Capital IQ.

The effective tax rate is a popular measure used by investors to compare how much companies pay in tax relative to profit.

The news comes months after after the Government Accountability Office released a report showing that companies in 2010 reported an average effective tax rate of 12.6%, well below the 35% federal corporate tax rate.

This is a topic which Ed and I have debated on these pages in years past, though it wasn’t that heated of an argument since we tend to agree on a number of relevant points. First of all, there is the question of whether or not some of these companies really pay no taxes. One of the first responses from the companies in question, frequently cited by conservative supporters, is that of course they pay taxes! And they provide documents proving they do. But what’s under discussion is the effective tax rate as measured against profits. If your profitable company sends in some tax payments, but later get refunds and adjustments equal or greater to the amount you paid in during final filing and revisions, you didn’t pay any taxes. It’s really that simple.

That makes some people pretty angry, but really it should make everyone angry… just not at the companies in question. They’re playing the game with the cards the government dealt them and they’re playing to win. The problem isn’t at Verizon – the top name on the list this year – but rather in Congress and in the massive, byzantine tax code.

One solution which I’ve suggested before could, I think, satisfy both the liberals who want to bleed “Big Fill In Industry Name Here” for some more cash as well as those who want to see a more fair, flat tax code which contributes some revenue while not squelching productivity. Let’s lower the corporate tax rate to 10% from its current levels, but essentially delete the rest of the tax code as it applies to corporations. Open your books at the end of the year. If you spent “X” dollars and you took in “Y” dollars, then you owe Uncle Sam 10% of the difference if Y is greater than X. No other deductions, sliding scales, devaluation tricks.. nothing.

For the aforementioned liberals, a plan like this has the effect of the tide going out and seeing who is or is not wearing a bathing suit. If you’re really paying a lot of taxes you’ll be happy to cut it down to 10% of your profits. If you’re using various dodges built into the system to effectively pay no taxes, you’ll oppose the plan. It’s pretty simple.

For conservatives, this takes a significant portion of the government boot off the throat of smaller to medium size businesses who are not fortunate enough to qualify for the big giveaways in the tax code. The ones paying the most are frequently those who aren’t big enough to afford the best lobbyists or the army of experts required to navigate their IRS paperwork every year. And on a related note, a lot of companies could probably save massive amounts of money up front by being able to do away with that army of accountants and tax attorneys. Who knows? Maybe they could even spend it on hiring a few more folks.

Here’s part of the list of S&P companies who fall into that category ranked by their total worth, just in case you’re interested.

Verizon: $146.4
MetLife: $53.9
Eaton: $32.7
Regeneron Pharmaceuticals: $29.6
Public Storage: $29.5
Ventas: $19.3
Avalonbay Communities: $17.4
Agilent Technologies: $16.9
Vornado Realty Trust: $16.8
Boston Properites: $16.7
Seagate Technology: $15.9
Broadcom: $15.7
News Corp.: $9.8

Make what you will of the breakdown by industry, keeping in mind that these are limited to S&P listed entities.


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Businesses DO NOT AND NEVER HAVE PAID TAXES. All they do is COLLECT TAXES FOR THE GOVERNMENT.

astonerii on October 26, 2013 at 4:07 PM

obama’s pockets and theirs…bulging.

Occupy America! He hates the middle and lower classes, always.

Schadenfreude on October 26, 2013 at 4:08 PM

Largest US companies paying no taxes.*

* Contributions to OFA not included.

Happy Nomad on October 26, 2013 at 4:11 PM

Why do we need a corporate tax at all?

These costs are passed on to consumers.

Leftists join hands with their low information helpers on the right (ahem).

faraway on October 26, 2013 at 4:12 PM

Politicians will never ever EVAR simplify the tax code. They would never give up that much power and control.

p0s3r on October 26, 2013 at 4:14 PM

Companies pay every dime of everyone else’s taxes (and their mortgages, electric bills, college educations, etc, etc). Be it through employee compensation and/or passing it on to purchasers.

LtGenRob on October 26, 2013 at 4:17 PM

both sides of the aisle

Progressives used to love Fascism, now they love crony capitalism. The progressives are common on both sides of the aisle. They each love particular big businesses and they all hate the middle class. McCain is a progressive as are Romney, both Bushes, Bob Dole (i.e., all Republican presidential candidates since Reagan) and pretty much the entire Republican establishment as well as almost all Democrats.

Ceteris Paribus on October 26, 2013 at 4:18 PM

obama’s pockets and theirs…bulging.

Occupy America! He hates the middle and lower classes, always.

Schadenfreude on October 26, 2013 at 4:08 PM

…E X A C T L Y !

KOOLAID2 on October 26, 2013 at 4:21 PM

Politicians will never ever EVAR simplify the tax code. They would never give up that much power and control.

p0s3r on October 26, 2013 at 4:14 PM

And think of all those CPAs who find themselves out of work. The tax industry is too big to fail.

Happy Nomad on October 26, 2013 at 4:22 PM

Companies pay every dime of everyone else’s taxes (and their mortgages, electric bills, college educations, etc, etc). Be it through employee compensation and/or passing it on to purchasers.

LtGenRob on October 26, 2013 at 4:17 PM

This administration doesn’t understand a basic fact. The private sector generates wealth. The public sector spends dollars collected from the private sector. Yet, all the job growth in the Obama administration is in the public sector. Obama has done nothing to encourage private sector job creation.

Happy Nomad on October 26, 2013 at 4:26 PM

Ceteris Paribus on October 26, 2013 at 4:18 PM

Very true. There are many progressives in the GOP, including the Bush Dynasty. Jeb probably is the biggest progressive of them all ( amnesty, Common Core, etc.).

bw222 on October 26, 2013 at 4:41 PM

What the?

Schadenfreude on October 26, 2013 at 4:44 PM

And on a related note, a lot of companies could probably save massive amounts of money up front by being able to do away with that army of accountants and tax attorneys.

Which helps explain why attorneys & accountants are usually Democrats.

itsnotaboutme on October 26, 2013 at 4:49 PM

Schadenfreude on October 26, 2013 at 4:44 PM

Hmm. Secrets? Or… to cheap to pay land lease?

In any case, certainly an indicator that perhaps these super tech giants may need some oversight…and given their access to ready cash… perhaps some oversight for those tasked with the oversight.

By the way…checked that “I, Claudius” quote. As I suspected, I misquoted. It was “Let all the poisons that lurk in the mud hatch out.” However, I think it still works just as well. :)

thatsafactjack on October 26, 2013 at 5:12 PM

Fair Tax. Everything else is just re-arranging the chairs.

platypus on October 26, 2013 at 5:17 PM

Why do we need a corporate tax at all?

These costs are passed on to consumers.

Leftists join hands with their low information helpers on the right (ahem).

faraway

Under a ‘small government’ framework, taxes are to pay for the cost of government; defense and guaranteeing contracts.

Businesses use courts of law and other parts of government to do biz that the average citizen doesn’t routinely use like security and finance enforcement, trademark and patent protection, etc.

The FCC, for example, was initiated by radio companies who needed to have frequencies assignment defined and enforced. That’s something the average citizen wouldn’t need.

chimney sweep on October 26, 2013 at 5:21 PM

Is this Salon, Huffington Post? I thought it was Hot Air. But it can’t be can it because this is pure Marxist propaganda about corporations not paying taxes? Well yes it can be if the writer is Jazz Shaw and sometimes Allahpundit or are they the same person?

bgibbs1000 on October 26, 2013 at 5:22 PM

If your profitable company sends in some tax payments, but later get refunds and adjustments equal or greater to the amount you paid in during final filing and revisions, you didn’t pay any taxes. It’s really that simple.

No, it’s really not. Have you heard of opportunity costs and time value of money?

Simply put, for however long the government had that money, the company was not able to use it for revenue-generating activities (opportunity loss). Also, a dollar today is not worth the same amount as a dollar when it was paid in taxes due to factors like inflation (time value).

Sockpuppet Politic on October 26, 2013 at 5:23 PM

By the way…checked that “I, Claudius” quote. As I suspected, I misquoted. It was “Let all the poisons that lurk in the mud hatch out.” However, I think it still works just as well. :)

thatsafactjack on October 26, 2013 at 5:12 PM

Works fine – cool find :)

OT – You might want to peruse this.

Schadenfreude on October 26, 2013 at 5:32 PM

Companies pay every dime of everyone else’s taxes (and their mortgages, electric bills, college educations, etc, etc). Be it through employee compensation and/or passing it on to purchasers.

LtGenRob on October 26, 2013 at 4:17 PM

This administration doesn’t understand a basic fact. The private sector generates wealth. The public sector spends dollars collected from the private sector. Yet, all the job growth in the Obama administration is in the public sector. Obama has done nothing to encourage private sector job creation.

Happy Nomad on October 26, 2013 at 4:26 PM

Well, that is just ridiculous. The both of you aught to be ashamed of yourselves. The worker creates the wealth. The company is a LUBRICANT that makes it easier for people to create wealth, particularly if they are not very good at business. But without the people the business accomplishes very little. When I work for my company the company is not GIVING me anything that I do not EARN, that includes the money I have to turn over to the government, the money they turn over to the government in my name and the money that remains in my pocket to buy theirs and other companies’ products. The company does not pay my taxes. I EARN that, I produce that wealth, all the company does it make it far simpler for me to create that wealth, because on my own, despite being in the top 1% intellectually, my gifts are not tilted toward profit orientations.

astonerii on October 26, 2013 at 6:42 PM

Forget about “loopholes” and “tax dodging”. The whole discussion boils down to 2 different accounting methods. Take the result from method A and apply it to method B (take the seeds out of an apple and see how they work on the orange)…as someone that dealt with this for decades, I can assure the crowd that apples and oranges will never cross-breed.

teejk on October 26, 2013 at 6:51 PM

If you do not like progressive language, what words would you dislike? Hmm……the words: “fair” and “tax” would definitely be two at the top of the list.

Ceteris Paribus on October 26, 2013 at 7:03 PM

Why do we need a corporate tax at all?

These costs are passed on to consumers.

Leftists join hands with their low information helpers on the right (ahem).

faraway on October 26, 2013 at 4:12 PM

Not true. Companies do not just add up their costs, tack on a markup, and then send the bill to consumers. Unless they are a monopoly. There is an intermediating mechanism known as the market that actually sets the price. It is then up to companies to figure out how to make money selling their products at the price set by the market. Conversely, if you eliminated corporate taxes tomorrow, you would not find companies reducing their prices by 12.6% across the board. You would just have boosted corporate retained earnings (and thus stock buybacks) by 12.6%.

Since the compensation packages of corporate executives are generally tied to stock performance and EPS, stock buybacks have recently become a way to boost share prices (and EPS) without actually improving company performance, perversely by de-capitalizing the business.

Also, although the comments section of a blog is not really the place for deep analysis, those of you advocating the elimination of corporate income taxes might want to think a bit about how that would affect all of the companies organized under Subchapter S (about 75% of all corporations).

HTL on October 26, 2013 at 7:57 PM

HTL on October 26, 2013 at 7:57 PM

There is so much stupid in your argument that it is hard to figure out where to begin.

First, the tax is on profits, not net sales. Thus companies that operate on 20% profit pay tax on only 20% of their sales. So, no kidding prices will not fall.
Second, while you are right, prices likely will not fall, what will happen is that prices will stagnate for a period while the increased profit is slowly reduced back to where it was. As you said, competition. Anywhere a company can undercut their competition and remain profitable, it will. The return on investment lower limit remains untouched.
Thirdly, you are wrong, companies do just add up their costs and tack on a mark up. They also do the exact opposite, the determine what the market will bear and give the product the features and quality to leaves them their specified markup. In this calculation, the likely automatically assume the COST of taxes to be full tax rate. Effectively, investors demand a set minimum return on investment, and since taxes take from that, they do in fact increase cost or reduce quality/features to get to that return on investment.
Fourthly, How would it effect the 75% of sub chapter S? It would pretty much get rid of the concept in its entirety. The reason anyone goes with S is because it is easier and at a lower total cost to them. Thus, it will drive prices lower yet for consumers.

astonerii on October 26, 2013 at 8:07 PM

The article is unclear: do these corporations pay no taxes, or do they pay no U.S. taxes?

I work overseas a lot, and make good money doing it, and I have a pretty good sized “taxes due” to Uncle Sam every year. But what I owe to Uncle Sam gets offset by what income taxes I have paid to these other countries, so the taxes that I actually pay to Uncle Sam are about 1/5 of all of my taxes paid. I’m taxed at a hefty U.S. rate, and I pay it, but it doesn’t all go to the US Treasury.

When you write that “corporations pay no taxes” I have to wonder from what line on the Form 1040 are you reading this?

ss396 on October 26, 2013 at 8:24 PM

Just fricken get rid of the whole business profit tax. Scrap the whole thing, it causes nothing but grief and cronyism.

Count to 10 on October 26, 2013 at 9:56 PM

Let’s lower the corporate tax rate to 10% from its current levels, but essentially delete the rest of the tax code as it applies to corporations. Open your books at the end of the year. If you spent “X” dollars and you took in “Y” dollars, then you owe Uncle Sam 10% of the difference if Y is greater than X. No other deductions, sliding scales, devaluation tricks.. nothing.

Doesn’t really work, since you haven’t dealt with things like investment and depreciation. Forget it. Just scrap the whole thing, and tax the personal income that individuals derive from the companies.

Count to 10 on October 26, 2013 at 10:04 PM

Doesn’t really work, since you haven’t dealt with things like investment and depreciation. Forget it. Just scrap the whole thing, and tax the personal income that individuals derive from the companies.

Count to 10 on October 26, 2013 at 10:04 PM

With all due respect, your suggestion doesn’t really work either, because if the companies in question are not distributing their earnings in the form of dividends (which they don’t; see: retained earnings), or their investors are not selling their stock (for the capital gains), there is no taxable event at all. And stock prices are too subject to short-term market conditions to make capital gains a reliable proxy for corporate income in any case.

HTL on October 26, 2013 at 11:18 PM

Largest US companies paying no taxes?

Of course they don’t. Alex Jones has been saying that for years…of course, no one should believe what Alex Jones has to say about anything, right?

Dr. ZhivBlago on October 26, 2013 at 11:58 PM

Now you see why a flat tax will never happen…

right2bright on October 27, 2013 at 8:18 AM

With all due respect, your suggestion doesn’t really work either, because if the companies in question are not distributing their earnings in the form of dividends (which they don’t; see: retained earnings), or their investors are not selling their stock (for the capital gains), there is no taxable event at all. And stock prices are too subject to short-term market conditions to make capital gains a reliable proxy for corporate income in any case.

HTL on October 26, 2013 at 11:18 PM

Non of it should be taxable until it becomes personal income anyway, and the income derived from corporate taxes is a pittance compared to the huge distortion effects they have on the market. If the average “effective tax rate” is 12.6%, then take the the total revenue from corporate taxes and multiply it by 1.8: that number is an additional amount of federal interference in the economy (which is what all spending is) that isn’t included in our “government spending as a % of GDP” numbers.

Count to 10 on October 27, 2013 at 8:55 AM

Now you see why a flat tax will never happen…

right2bright on October 27, 2013 at 8:18 AM

It could happen if corporate taxes were scrapped.

Count to 10 on October 27, 2013 at 8:56 AM

That is why billionaires like Buffet support progressives. They can use the government to crush their competition.

In capitalism, anyone can win the market with a superior product or competitive business skills.

In socialism, you win the market by using the government to keep your competition from ever going into business, or regulate them out of business.

You can oversimplify capitalism to “a quest to accumulate as much wealth and power as possible.” But, anyone can enter the game.
Socialism simplifies to the same. “A quest to accumulate as much wealth and power as possible.” The difference is, with socialism, you need political connections to accumulate wealth.

Progressives like Pelosi, Schumer, Grayson, DWS, and Buffet are not interested in “income redistribution” or social justice. They are interested in being wealthy and politically connected in a socialist world.

tdarrington on October 27, 2013 at 9:24 AM

Would have thought GE would be at or near second place.

TimBuk3 on October 27, 2013 at 10:10 AM

Businesses DO NOT AND NEVER HAVE PAID TAXES. All they do is COLLECT TAXES FOR THE GOVERNMENT.

astonerii on October 26, 2013 at 4:07 PM

End of line.

deptofredundancydept on October 27, 2013 at 10:38 AM

What’s unjust is not that some businesses pay no taxes; it’s that there are some who do.

Government uses business as a tax collector on individuals, but they only have power over domestic companies. This means that domestic small and medium-sized businesses have to pass taxes through to their customers while some big businesses don’t.

Worse, they are forced to pass the burden to foreign customers as well, which makes us less competitive overseas, and foreign production is untaxed, which hurts American businesses at the expense of foreign business.

It’s time to do away with the business income tax, and ALL income taxes, and replace them with a fully transparent national retail sales tax. And if you want to do a “prebate”, per the Fair Tax, I suggest it be done as a fixed fraction of receipts, not as a fixed dollar amount.

njcommuter on October 27, 2013 at 3:13 PM