Fifty-five of America's biggest companies paid no income tax at all last year.
Republicans are criticizing President Joe Biden's plans to raise the corporate tax rate, claiming that the extra tax burden would be damaging to companies as they struggle to recover from effects of the pandemic.
However, they are ignoring the fact that many of the country's largest corporations pay taxes far below the rate set for such entities, and that 55 of them paid no income tax at all in 2020.
"Increasing the corporate tax rate won't pull us out of the COVID recession or set up long-term economic prosperity, but keeping the American corporate tax rate competitive will help businesses recover," tweeted Sen. Ron Johnson of Wisconsin on Tuesday.
"The tax increases being proposed by the Biden Admin would stifle domestic job growth and make America one of the worst places to do business," tweeted Rep. Michelle Steel of California. "Make no mistake – raising the corporate tax rate will be felt in the paychecks of working Americans."
Biden is proposing raising the corporate tax rate from 21% to 28%, as well as expanding estate taxes and increasing income taxes on Americans with incomes over $400,000. The proposed increases would fund his $2 trillion jobs and infrastructure American Jobs Plan.
Congressional Republicans' arguments against raising corporate taxes don't take into account the distinction between the statutory tax rate — what companies are, on paper, required to pay — and the effective tax rate, the taxes that they actually pay. American corporations are as a whole, in fact, paying less in taxes than they ever have before, and actual U.S. corporate tax revenue is among the lowest of all the largest developed national economies.
A recent analysis by the Institute on Taxation and Economic Policy found that 55 of America's largest corporations paid absolutely no income tax in 2020. Taking into account the combined federal tax rebates of $3 million these companies received, their effective tax rate sat well below 0%, averaging -9%.
Among the companies that paid no income taxes last year are some of the best-known in the country, including Dish Network, FedEx, HP, Michaels, Penske, Nike, Charter Communications,, American Electric Power, Salesforce.com, and Advanced Micro Devices.
Telecommunications company Charter Communications had pre-tax income of $3.68 million in 2020 and paid taxes at a rate of -2%, while Nike's income was almost $2.9 million income, on which its rate of taxation was -3.8%. FedEx's income was more than $1.2 million; it paid taxes at a rate of -18.9%.
"FedEx pays all of its taxes owed to local, state, federal, and foreign governments," a FedEx spokesperson told the Washington Post, adding that "through the third quarter of fiscal year 2021, FedEx has paid nearly $2 billion in U.S. federal income tax in the last 10 years."
According to the Post, however, 26 of those 55 companies have paid no income tax at all since 2017. Their ability to legally avoid paying their fair share in taxes is in large part due to the Tax Cuts and Jobs Act of 2017 spearheaded by Donald Trump. The legislation, which was touted as helping working-class Americans, ultimately slashed the corporate tax rate from 35% to 21% and offered other major tax breaks and credits to big corporations.
Republicans also falsely claim that a corporate tax raise would harm small business owners.
During a House Financial Services Committee hearing in late March, Rep. Ann Wagner of Missouri asked Treasury Secretary Janet Yellen, "Why, as this country begins to reopen and recover economically, would the Biden administration be proposing tax policy which would in the end hurt the American family and millions of struggling small businesses?"
But the vast majority of small businesses would remain unaffected by a corporate tax hike, since most small businesses are not incorporated.
According to a February report by the website The Balance Small Business, "About 75% of small businesses are not corporations. This large percentage of small businesses are considered 'pass-through' entities, which means they pay tax at the personal tax rate of the owner."
Unlike Republican lawmakers, the majority of Americans, including nearly half of Republicans, support raising taxes on corporations. A new Morning Consult/Politico poll released Wednesday shows that 3 in 5 voters support a corporate tax increase, with 42% of Republicans supporting such a measure. Gallup polling has found that 70% of Americans agree that corporations don't pay their fair share in taxes.
President Biden defended a corporate tax hike on Monday, noting there's "no evidence" that raising corporate taxes would harm the economy.
He then slammed companies that avoid paying taxes.
"Here you have 51 or 52 corporations in the Fortune 500 that haven't paid a single penny in taxes for three years," he said.
Published with permission of The American Independent Foundation.