Profitable Companies Pay Little to No Tax Thanks to Trump: New Study
The tax overhaul Donald Trump signed into law in 2017 cut the federal corporate income tax rate from 35% to 21%, but during the first five years it has been in effect, most profitable corporations paid considerably less. The tax law’s effects are explored in a new in-depth study from the Institute on Taxation and Economic Policy, which analyzes federal corporate income taxes paid by 342 large corporations that were profitable in each year from 2018 through 2022.
The new findings demonstrate a major flaw with our tax system. Each of the companies included in this study was profitable for each of the five years, yet many did not pay a reasonable amount of taxes compared to their profits.
Key findings:
- The big companies paid an average effective income tax rate of just 14.1% during this five-year period, almost a third less than the statutory rate of 21%. An effective tax rate refers to the share of reported profits turned over to the federal government as corporate income tax payments.
- Of these, 87 companies paid effective tax rates in the single digits or less with 55 paying less than 5%. This is particularly striking given that all these companies were profitable for at least five years consecutively. Companies paying less than a nickel on each dollar of profit include T-Mobile, DISH Network, Netflix, General Motors, AT&T, Bank of America, Citigroup, FedEx, Molson Coors, and Nike.
- The study found that 23 corporations paid no federal income tax over the entire five-year period despite being profitable every year.
- In at least one of the five years, 109 corporations paid zero federal tax.
- In all, these 342 corporations received $275 billion in tax subsidies from 2018 through 2022 with $155 billion benefitting just 25 corporations.
- Many of these corporations could ultimately pay even less tax under a House-passed bill that rescinds a 2022 tax increase related to research and development. It appears that 82 corporations could receive an additional $34 billion in tax breaks should that legislation becomes law.
“For many of the biggest corporations in America, our 21 % tax rate is an accounting fiction,” said Matt Gardner, lead author of the study and ITEP Senior Fellow. “Because of an array of special-interest tax breaks, the most profitable corporations in America routinely pay effective tax rates far below the legal rate.”
Corporate tax avoidance occurs because Congress allows it. The Trump tax law, in some ways, worsened tax avoidance.
In 2022 President Joe Biden signed into law a corporate minimum tax. Money for tax enforcement was included in that legislation. Other White House proposals have not yet become law, like the global minimum tax negotiated by the Biden administration, currently blocked by Congress.
Steve Wamhoff, ITEP Federal Policy Director and co-author of the study, said “Americans who heard President Trump and his supporters in Congress tout the 21 % corporate income tax rate they enacted in 2017 may be alarmed to hear that so many corporations pay much less than that in reality. It does not have to be this way. Congress can and should take more steps to crack down on this widespread corporate tax avoidance.”
Over more than four decades, ITEP has conducted similar studies of corporate taxes. An earlier ITEP report showed that 55 large, profitable corporations avoided paying any federal corporate income taxes in 2020. President Biden cited that report repeatedly by in arguing for the reforms that Congress eventually enacted as part of the Inflation Reduction Act. ITEP followed that with a report showing that even among corporations that were profitable each year for three years in a row, many paid little or nothing under the Trump tax law.
This study goes further, examining corporations that have been profitable but paid little to no tax each year for the five years 2018 through 2022.
The new findings demonstrate a major flaw with our tax system. Each of the companies included in this study was profitable for each of the five years, yet many did not pay a reasonable amount of taxes compared to their profits.
Editors’ Note: ITEP’s analyses of tax and other data going back decades have held up in every way and in every study, which is why, at DCReport, we rely on their work.