Why 1 in 9 of America's Biggest Companies Pay Zero Taxes

Search form

Why 1 in 9 of America's Biggest Companies Pay Zero Taxes

Why 1 in 9 of America's Biggest Companies Pay Zero Taxes
Wed, 10/30/2013 - by Alan Pyke
This article originally appeared on Think Progress

Among companies listed on the S&P 500, almost one in nine paid an effective tax rate of zero percent — or even lower — over the past year, according to an analysis by USA Today.

There are 57 separate companies listed on the index that paid a zero percent rate from the past year. Those companies include both household names like Verizon and News Corp. and lesser-known corporate giants like the data storage manufacturer Seagate (market value $15.9 billion) and Public Storage (market value $29.5 billion).

Many of the companies USA Today identified in its analysis as paying negative rates make the list because they lost money, but several were profitable. Previous analyses have shown that the typical corporation pays a lower effective tax rate than most middle-class families, and a far lower one than the statutory corporate tax rate against which business interests disingenuously rail.

Getting to a zero percent tax rate despite turning a profit requires creative accounting, but not lawbreaking. The corporate tax code allows companies to avoid tax liability even in years when they turn a profit. Some of the profitable companies on the newspaper’s list, such as General Motors, achieved a zero percent rate by banking tax credits from previous years when business was bad.

But the more common gambit involves moving revenues from parent companies to offshore subsidiaries based in tax haven countries in the Caribbean, Europe, and elsewhere.

Such offshoring of profits has caught the attention of policymakers in the United States and Europe this year, with the focus predominantly on Apple Inc. The U.S. tech giant not only avoided the American tax system, but managed to shelter about $100 billion in revenues from any taxes at all. That scheme relied upon a loophole in Irish law which that country’s government says it intends to fix, but the narrow change proposed by Ireland’s finance minister will not address the larger problem of corporate tax avoidance.

Tax dodging costs the U.S. about $300 billion per year. Much of that lost revenue is from individuals, rather than corporations. The country is cracking down on individual tax dodgers and striking deals with countries such as Switzerland and the Cayman Islandsthat will help identify tax cheats starting in 2014.

The corporate tax avoidance problem is thornier, as it is generally done through entirely legal methods. Coordinating international tax law in a way that would minimize corporate tax trickery is very difficult under the current approach, and a paradigm shift in business tax law may be necessary to end the accounting practices that rob countries of tax revenue.

Originally published by Think Progress

Article Tabs

Things are heating up inside Wall Street’s new rental empire.

The legitimacy of the U.S. government is now in question. It is up to us to use McCutcheon to energize the movement against money-corruption of the government and economy.

Walmart and the Walton family receive tax breaks and taxpayer subsidies estimated at more than $7.8 billion a year – that is enough money to hire 105,000 new public school teachers.

In San Francisco and the Bay Area especially, the Heartbleed bug has put the issue of privacy and online security at the forefront of Internet activism.

The newspapers were awarded the highest accolade in U.S. journalism for their groundbreaking articles on the NSA’s surveillance activities based on the leaks of Edward Snowden.

If you can’t overthrow the government overnight, you might try to unseat a Congressman burdened with an atrocious voting record, something Carl Gibson shows us step-by-step how to do in his new book.

Posted 6 days 23 hours ago

A series of potential jurors voiced opposition to Occupy Wall Street as Cecily McMillan, 25, faces seven years in prison for assault.

Posted 4 days 23 hours ago

"Right now the future of Spain's youth looks pretty black. The country is not creating anything. With minimal job opportunities, many young people are going to other countries to find work.”

Posted 5 days 17 min ago

The new 192-page book documents the activities of Occupy Austin and includes photographs of marches, arrests, assemblies, court trials, the camp itself and even law enforcement infiltration.

Posted 4 days 23 hours ago

New research finds that richest 0.1 percent of Americans have doubled their share of the pie, dramatically expanding their portion of the country's wealth in three decades.

Posted 4 days 23 hours ago

At least 36 people on Wednesday morning were reportedly killed — and perhaps dozens more — as military forces launched a long-threatened operation to remove two pro-Morsi sit-ins in Cairo.

Poem: The Beating Heart Everywhere

One year since we rose up and linked hands and listened to one another.

205,000 Parents of U.S. Citizens Deported in Two Years

The federal government has conducted more than 200,000 deportations of parents whose children are U.S. citizens in a timespan of just over two years.

20 Excuses for Playing Hooky on May Day

On May 1, the International Worker’s Day holiday, Occupy Wall Street will stage a general strike. Oddly, union workers suffer under the yolk of a piece of 1947 GOP legislation called the Taft-Hartley Act, which requires unions to give 60 days notice for any strike action, and bans a variety of actions like the general strike.

The 99 Percent Wakes Up

Inequality isn’t only plaguing America—the Arab Spring flowered because international capitalism is broken. Nobel laureate Joseph Stiglitz says the world is finally rising up and demanding a democracy where people, not dollars, matter.

Sign Up