On 8/22/2011, a diary reached the top of the rec list that was a reposting of Bernie Sanders top list of corporations not paying their share. For the most part, I like Bernie Sanders. I think he's got some great views on mitigating the negative impacts corporations have on our society. But on the other hand, this list has given many people here the false perception that giant corporations aren't paying appropriate taxes.
After the squiggly, I set the record straight.
Oh, and a last minute warning: many of the links below are to big PDF files. Oh, and my calculations are generally from 10-Ks, and it's somewhat difficult to get at all the information you want from these documents. I'm doing the best I can, so please forgive and correct any mistakes or inaccurate assumptions I make.
Please keep in mind that none of the numbers I'm quoting here are referenced, so I'll have to do my best to figure out where they are coming from.
Exxon Mobil made $19 billion in profits in 2009. Exxon not only paid no federal income taxes, it actually received a $156 million rebate from the IRS, according to its SEC filings.
Ugh. Exxon made $19B in profits in 2009 after a tax expense of $15B. Income before taxes was $35B. Just look at the line item for Income Tax Expense on their income statement. Or, if you want to pull up their annual report, and scroll to page F-32, you will see under Note 4 that "Cash Payments for Income Taxes" is $15.427B. That is how much cash left Exxon's bank accounts as taxes paid. Theoretically, these taxes aren't broken out by country, so they could be payments to other countries, but that would probably mean that Exxon really isn't doing any business in the US and doesn't owe taxes. As for the $156M in the quote, I have no clue what that is. But seriously. Exxon pays taxes. Exxon pays a shitload of taxes. They even publish a document telling us how much tax they pay (granted, it's convoluted, but still). And if you want to be taken seriously in a discussion regarding corporations and taxes, you damn well better not say something to imply that Exxon doesn't pay taxes. You will be ignored from that point forward - and rightfully so.
Bank of America received a $1.9 billion tax refund from the IRS last year, although it made $4.4 billion in profits and received a bailout from the Federal Reserve and the Treasury Department of nearly $1 trillion.
As for the bailout, I'm not going to discuss that here. Let's talk about the $1.9B "refund." What do you consider a refund to be? I consider it to be cash I paid in the past that I am now getting back. Under this definition, the $1.9B negative tax expense in BofA's income statement is not a refund. But let's talk about what that $1.9B really is. If you look at the full annual report, you find this paragraph to describe what happened:
Income tax benefit was $1.9 billion for 2009 compared to expense of
$420 million for 2008 and resulted in an effective tax rate of
(44.0) percent compared to 9.5 percent in the prior year. The change in
the effective tax rate from the prior year was due to increased permanent
tax preference items as well as a shift in the geographic mix of our earnings
driven by the addition of Merrill Lynch. Significant permanent tax
preference items for 2009 included the reversal of part of a valuation
allowance provided for acquired capital loss carryforward tax benefits,
annually recurring tax-exempt income and tax credits, a loss on certain
foreign subsidiary stock and the effect of audit settlements.
So basically, to me it looks like a bunch of craziness due to the Merrill Lynch merger, and probably what the government did with tax treatments to entice BofA to actually purchase the failing Merrill. Agree with it or not, I guess, but it's certainly not a refund. I'd look at it this way, BofA was making money and putting aside taxes that would be due in the future. Then they got shitty Merrill Lynch with a bunch of losses that reduced their net income. So, now they don't have to pay as much in taxes because they're absorbing Merrill's losses. Sounds fair to me.
Oh, and if you're still upset, go back to that 2010 income statement. In 2010, BofA recognized taxes of $915M on a gross loss of $1.3B, bringing the net loss to $2.2B. So in 2010 they were paying tons of taxes on no income at all.
Over the past five years, while General Electric made $26 billion in profits in the United States, it received a $4.1 billion refund from the IRS.
Um, no. Not a refund. But GE isn't really paying much in taxes either. Take a look at Note 14 in their 2010 annual report. I don't follow everything in there, but it looks like GE is balancing its profits with reinvestments in its subsidiary GECS. Also, it appears that GE has banked a bunch of money to pay taxes with, so that it doesn't have to recognize a tax expense when tax bills are actually paid. Also, if you look at the end of Note 14 on page 103, it looks like most of the reduction in tax rate came from taxes GE paid "on global activities including exports." Complicated stuff. Probably too much for me to fully understand at this point. But the IRS isn't giving them any money, either. I'd say GE probably is a ripe target for higher taxes.
Chevron received a $19 million refund from the IRS last year after it made $10 billion in profits in 2009.
$19M? This is Chevron. Why are we talking about $19M? Just a little tip, when you're talking about oil companies, think billions. Speaking of billions, Chevron had a tax expense of $8B in 2009. Gross income of $18B, net income of $10B. See their annual report and Note 15, if you want to understand more. But the bottom line is that the taxes are being recognized and were either already paid, or will be paid in the future.
Boeing, which received a $30 billion contract from the Pentagon to build 179 airborne tankers, got a $124 million refund from the IRS last year.
Well, whoop-tee-doo. I'm not even going to research this one. So Boeing won a $30B contract to build some planes. But if it costed them $30B to build said planes, they owe no income taxes because they haven't made any money.
Valero Energy, the 25th largest company in America with $68 billion in sales last year received a $157 million tax refund check from the IRS and, over the past three years, it received a $134 million tax break from the oil and gas manufacturing tax deduction.
Again, sales are not indicitive of taxes. Remember that COGS. Turns out that in 2009 Valero had a net loss of about $2B. So yeah, that's probably why they weren't paying any taxes. And so what if over the last three years it received $134M for a tax break? Over the last three years it has expensed $1.9B in taxes. annual report
Goldman Sachs in 2008 only paid 1.1 percent of its income in taxes even though it earned a profit of $2.3 billion and received an almost $800 billion from the Federal Reserve and U.S. Treasury Department.
"Received" $800B as in "got loaned," maybe.
And why did we jump all the way back to 2008 for GS? Oh, because in 2009, they paid $6.4B in taxes on $19.8B in pretax income, or about 32%. And in 2010 they paid $4.5B on pretax income of $12.9B, or 35%. If you want to be outraged, fine. But you're about 3 years too late. The situation has been resolved. If you really want to know what happened in 2008, see Note 16 in their 2008 annual report. They break it down. Mostly, the difference is due to deferred taxes. I should probably have explained this earlier, but GAAP and the US government make you treat taxes differently. A deferred tax benefit/loss is just a temporary difference between the two. It all gets smoothed out in the end. When companies have big unexpected losses or profits, usually their assumptions about taxes get revised, so they may need to adjust estimated taxes. It seems like a lot of this was done in 2008. And it's perfectly reasonable.
Citigroup last year made more than $4 billion in profits but paid no federal income taxes. It received a $2.5 trillion bailout from the Federal Reserve and U.S. Treasury.
Loan again? And which year is last year? In 2010, Citigroup had over $10.6B in net income. In 2009, Citigroup had a net loss of $1.6B. In 2008, Citigroup had net loss of $27.7B.
ConocoPhillips, the fifth largest oil company in the United States, made $16 billion in profits from 2007 through 2009, but received $451 million in tax breaks through the oil and gas manufacturing deduction.
Um, so? I get tax breaks for, say, my mortgage. Just because I get a tax break doesn't mean I'm not paying taxes. Just because ConocoPhillips gets a tax break doesn't mean they're not paying taxes. Actually, they are.
Over the past five years, Carnival Cruise Lines made more than $11 billion in profits, but its federal income tax rate during those years was just 1.1 percent.
Yeah, Carnival actually appears to be paying very little in taxes. Hooray, we found one.
Well, I'm done with this. And actually, I lost interest long ago. If you're going to take anything away from reading this, please let it be that you don't understand corporate taxes. Also, corporations generally do pay fairly reasonable taxes. The corporate tax code isn't all that messed up. Stop freaking out about corporate taxes and let the people who we elect and hire to set these tax rates do their jobs. If you want to make a difference, work on enacting stronger barriers to corporations donating to political campaigns. Or work on getting your friends and family to ignore the bullshit 30-second television ads that money goes to buy.