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

The coalition was set to deliver more than 200,000 signatures to the White House, Department of Homeland Security and Department of Justice, calling for transparency and justice in police killings.

Divestment is less about denying fossil fuel companies the financial resources to operate – it's more about denying them reputation, legitimacy and “social license.”

Americans greatly underestimate the degree of inequality in our country – and if we were given proper media coverage of the endless takeaway of wealth by the super rich, we'd be taking it personally.

Wealthy people are often so isolated from the rest of us, many of them have forgotten how rich they really are.

Two political philosophers, Sheldon Wolin and John Ralson Saul, call for mass movements willing to carry out repeated acts of civil disobedience to disrupt and delegitimize corporate power.

Florida has the highest foreclosure rate in the U.S. in the first quarter of 2014, and also has a "foreclosure king" who is now disbarred for his failure to oversee employees accused of carrying out wrongful foreclosures.

Posted 4 days 13 hours ago

This isn't just a right to revolt, it's a call to revolt, an outright slam against apathy and nonresistance.

Posted 3 days 12 hours ago

"Peoples' movements will either succeed in transforming our economic and political systems to build a new world, or we will burn with the old one."

Posted 4 days 13 hours ago

On Sunday, hundreds of people milled around a protest site in the gentrifying, densely-populated district Mong Kok, manning aid stations and sitting in small circles on the pavement.

Posted 4 days 13 hours ago

The city's social justice roots are centuries old – and today Seattle is also home to more than 70 social justice organizations and more than a dozen progressive film festivals.

Posted 2 days 14 hours ago

The coalition was set to deliver more than 200,000 signatures to the White House, Department of Homeland Security and Department of Justice, calling for transparency and justice in police killings.

Coinciding with the National Day Against Police Brutality and Mass Incarceration, people in Santa Rosa, Calif., will hold a vigil and community potluck Wednesday to commemorate the teen's tragic death.

Some critics say that the "militarization of the police" is happening right in front of our eyes – but if the Founding Fathers were so worried about a threat of domestic tyranny, how did we get here?

"Peoples' movements will either succeed in transforming our economic and political systems to build a new world, or we will burn with the old one."

This isn't just a right to revolt, it's a call to revolt, an outright slam against apathy and nonresistance.

Sign Up