FOR IMMEDIATE RELEASE: FEBRUARY 26, 2014
For CTJ/ITEP: Jenice Robinson, (202) 277.8750, Jenice@ctj.org
For NJPP: Jon Whiten, (609) 393-1145 ext 15, firstname.lastname@example.org
New Jersey-Based Honeywell Among Companies Singled Out for Tax Avoidance
Washington, D.C. – A comprehensive five-year study of 288 highly profitable Fortune 500 companies finds that 111 of them paid no federal corporate income tax in at least one of the last five years while one-third paid a U.S. tax rate less than 10 percent over the same period, including 26 that paid nothing at all, Citizens for Tax Justice and the Institute on Taxation and Economic Policy said today.
Contrary to the myth spread by corporate lobbyists, most multinational corporations in the study (The Sorry State of Corporate Taxes: What Fortune 500 Firms Pay (or Don’t Pay) in the USA and What They Pay Abroad — 2008–2012) paid lower U.S. taxes on their U.S. profits than they paid to foreign governments on their foreign profits.
“Corporate lobbyists incessantly claim that our corporate tax rate is too high, and that it’s not ‘competitive’ with the rest of the world,” said Robert McIntyre, Director of Citizens for Tax Justice and the report’s lead author. “Our new report shows that both of these claims are false. Most of the biggest companies aren’t paying anywhere near 35 percent of their profits in taxes and far too many aren’t paying U.S. taxes at all. Most multinationals are paying lower tax rates here in the United States than they pay on their foreign operations.”
New Jersey-based Honeywell, which in 2012 was awarded a state tax break of $40 million not to leave New Jersey, paid no federal corporate income taxes in 2009 and 2010, despite posting $3 billion in profits in those two years. Because of various tax breaks and loopholes, Honeywell’s effective federal corporate income tax rate in 2009 and 2010 was -17.2 percent. For the five-year period 2008-2012, Honeywell paid a federal corporate income tax rate of just 7.5 percent.
And Verizon, which has been awarded $91.9 million in New Jersey corporate subsidies, is one of 26 companies that paid no federal corporate income tax for the entire five-year period, coming in with an effective rate of -1.8 percent even as it posted $30 billion in profits.
“With New Jersey’s middle class being hollowed out and working families scrapping to hang on, the corporate sector – which has prospered coming out of the Great Recession – should contribute its share to the nation’s needs,” said Gordon MacInnes, President of New Jersey Policy Perspective. “The truth revealed in this report makes plain that corporations are doing much better than the consumers they rely on.”
The study examines five years’ worth of data on federal income taxes paid by 288 corporations–every Fortune 500 company that was profitable each year of the study and provided sufficient, reliable information in their financial reports to allow calculation of their effective U.S. and foreign tax rates. Although the statutory corporate federal tax income tax rate is 35 percent, these corporations paid an average effective rate of just 19.4 percent over the past five years, barely more than half the official rate.
Among the report’s other findings:
• 111 of the companies enjoyed at least one year in which their federal income tax was zero or less.
• 26 companies, including Boeing, General Electric, Priceline.com and Verizon, enjoyed negative income tax rates over the entire five-year period, despite combined pre-tax profits of $170 billion.
• Of the 125 multinational companies in this sample, two-thirds paid a lower U.S. tax rate than the rate they paid to foreign governments on their foreign profits. On average, their foreign effective tax rate was 12 percent larger than their U.S. effective rate.
• The total amount of federal income tax subsidies enjoyed by the 288 profitable corporations over the five years was $362 billion.
• Wells Fargo tops the list of corporations receiving the most in tax subsidies, getting more than $21 billion in tax breaks from the U.S. treasury from 2008 through 2012.
• Pepco Holdings had the lowest effective tax rate of all the companies in the study, at negative 33 percent over the five-year period.
• Industry tax rates varied widely, from a low of 2.9 percent for utilities to a high of 29.6 percent for healthcare companies.
• Some companies within sectors fare worse than others. For example Time Warner Cable paid 3.9 percent over five years, while its competitor Comcast paid 24 percent.
• More than half of the federal corporate tax subsidies received by the companies in the study went to four industries: financial services, utilities, telecommunications, and oil, gas & pipelines.
The report outlines a set of sensible reform options that could help revitalize the corporate tax, including ending the indefinite deferral of taxes in foreign profits and tax breaks for executive stock options.
The Sorry State of Corporate Taxes is the latest in a series of comprehensive publications on corporate taxes from Citizens for Tax Justice (CTJ) and the Institute on Taxation and Economic Policy (ITEP). The two groups released their first major study on the federal income taxes that large, profitable American corporations pay, or fail to pay, in 1984, when it helped lead to the loophole-closing Tax Reform Act of 1986.
Citizens for Tax Justice (CTJ), founded in 1979, is a 501(c)(4) public interest research and advocacy organization focusing on federal, state and local tax policies and their impact upon our nation (www.ctj.org).
Founded in 1980, the Institute on Taxation and Economic Policy (ITEP) is a 501(c)(3) non-profit, non-partisan research organization, based in Washington, DC, that focuses on federal and state tax policy. ITEP’s mission is to inform policymakers and the public of the effects of current and proposed tax policies on tax fairness, government budgets, and sound economic policy (www.itep.org).
New Jersey Policy Perspective (NJPP), founded in 1997, is a nonpartisan nonprofit research organization dedicated to creating economic opportunity and prosperity for all New Jerseyans (www.njpp.org).
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