What do mega-corporations like communications giant Verizon and big pharma drug maker Bristol-Myers Squibb have in common, besides their billions in earnings? They both paid an effective tax rate of zero percent over the past year.
A recent USA Today report shows that more than 10 percent of the nation’s largest 500 companies were able to work the system so that they paid little to nothing in taxes. This comes despite the fact that many of them complain bitterly about the nation’s 35 percent federal corporate tax rate. A Government Accountability Office study earlier this year showed businesses with assets of $10 million or more paid just 12.6 percent effective tax rate in 2010.
How does it happen? These corporate titans of greed take advantage of shadiness in the tax code by using gimmicks like accounting rules and offshore transfer payments to depress the amount of their profits that can be taxed. The result is some even end up paying negative tax rates on their earnings.
“Investors hope company management is doing everything they can to generate profit, legally,” Gradient Analytics’ Nick Yee told USA Today. “But the tax code is gray, and there’s often no set guidance.”
In all, 57 companies listed on the S&P 500 paid a zero rate during the past year. Other notables on the list include MetLife, Public Storage and News Corp. It is estimated that tax dodging costs the U.S. about $300 billion a year.
Another big business that has been successful at not paying up is Federal Express, which it was revealed earlier this year has paid only a 4.2 percent tax rate on the $9 billion in profits it’s made over the past five years. Anti-union FedEx is one of 32 companies behind the Reforming America’s Tax Equitably Coalition. Evidently it believes the pittance it is paying is still too much.
FedEx is also a leader when it comes to misclassification, where it falsely identifies its ground drivers as independent contractors to minimize its tax liabilities.
Of course, all this faux pain-and-suffering for corporate bosses comes as real hard-working Americans and the less fortunate are truly experiencing the brunt of what the economy has wrought. They work, pay their taxes and do the best they can to get by while paying their full tax bill. But they are also covering the tax shortfall that these billion-dollar businesses are pushing off on them.
It’s beyond the pale that families are struggling to keep a roof over their head and food on the table while many corporations are busy counting their ill-gotten gains. It’s time for big business to pay their fair share.