Every few months the Republican Party threatens to shut down the federal government claiming the country is in massive debt and must tighten its spending belt by cutting social programs. In January Congress passed and President Joe Biden signed into law a short-term funding bill that expires in two stages the first week of March. But the problem is not spending, it is revenue, and a big part of that problem is wealthy corporations avoiding paying federal taxes.
According to a report by Americans for Fair Taxes and the blog Popular Information, the average American family paid a higher percentage of their income in taxes in 2022 than corporations earning billions of dollars in profits. Working people can’t avoid paying federal income taxes. Employers withhold payment from our paychecks. Small business owners and independent contractors make scheduled tax payments to the federal government based on estimates of their annual income. In 2020, the effective tax rate for the average family was 13.6% of their income. That means if you made $100,000, you paid $13,600 in federal income taxes.
General Electric boasted to its shareholders that it made $7 billion in profits during 2023. According to its CEO and Chairman H. Lawrence Culp Jr., "In 2023, our teams delivered an excellent year, more than tripling earnings and generating almost 70 percent more free cash flow." Much of the money went to shareholders, including corporate executives, in the form of "dividends, buybacks, and retiring our preferred equity." But instead of paying a huge federal tax bill on the $7 billion in profits, GE was able to use a variety of tax loopholes to avoid payment and actually received a refund from the federal government of $423 million.
Other companies were able to manipulate the tax codes for their benefit as well. T-Mobile reported almost an $11 billion profit in 2023 and paid about $42 million in federal income taxes, an effective tax rate of less than one-half of a percent (0.4%). Elon Musk’s Tesla Corporation earned $3.2 billion in domestic profits alone in 2023, but paid only $48 million in federal income taxes or 1.5%.
GE, T-Mobile, and Tesla are not tax avoiding anomalies. The Institute on Taxation and Economic Policy (ITEP) found that as a result of Trump era tax cuts, in 2020, fifty-five of the largest American Corporations paid no federal corporate income taxes at all on total pre-tax earnings of over $40 billion and they received $3.5 billion in rebates from the federal government. Companies that paid no federal income taxes between 2018 and 2020 include Agilent Technologies, DISH Network, Duke Energy, FedEx, and Salesforce.com. Companies that paid sharply reduced tax bills despite billions in earnings include Amazon.com, Bank of America, Charter Communications, Consolidated Edison, Domino's Pizza, General Motors, Molson Coors, Netflix, Nike, Verizon Communications, Viacom, Walt Disney, and Xerox.
If Donald Trump is elected President in 2024, expect even more corporate giveaways while ordinary people foot the bill. Republicans want to lower the top corporate tax rate from 21% to 15% corporate tax rate, a number Trump initially endorsed when he was President the last time.