Just as average Americans are preparing to pay their taxes for next month’s deadline, it’s now been revealed once again that some of the country’s richest and most profitable corporations paid $0 in taxes last year, and many are even getting massive refunds.
USA Today assembled a list of 27 multinational corporations that posted between $56 million and $4.6 billion in profits in 2015, yet got money back from the government rather than paying federal taxes. Some of these corporations are household names, and they represent multiple industries ranging from media, to technology, to healthcare, to transportation.
Many of these negative tax bills are due to accounting loopholes that allow profitable global giants, like American Airlines, to write off losses amounting to billions of dollars. Even though American Airlines owed $1.5 billion in federal taxes, the company successfully wrote off $4.7 billion in losses, amounting to a $3.2 billion refund from Uncle Sam. When adding up the refunds, these 27 companies — a mere snapshot of a much larger, systemic issue in the tax code — are responsible for over $11 billion in tax revenue that would have otherwise gone to public services:
This itself is a small window into the culture of corporate tax avoidance, as over $2.1 trillion in corporate profits is stashed in overseas tax havens. The way the U.S. tax system is set up, companies that book their profits in tax-free territories like Bermuda and the Cayman Islands can pay 0 percent tax rates on those profits as long as the money remains there.
Some of the most well-known corporations famously avoid U.S. taxes by booking profits overseas, like Apple, Microsoft, Oracle, Qualcomm, JPMorgan & Chase, Citigroup, Bank of America, and Goldman Sachs. As bad as this is, top U.S. officials are contemplating a proposal that would further deplete the U.S. Treasury of badly needed tax revenue.
President Obama himself proposed lowering the American corporate tax rate from 35 percent to 14 percent for any company that decides to “repatriate,” or bring home, any of the profits stashed overseas. Our current Congress obliged by introducing bills to do just that. Were all of the companies who store money this way to take advantage of such a proposal, it would amount to approximately $400 billion in lost revenue. That money could fund roughly 7 years of tuition-free public college across the country.
However, President George W. Bush tried this in 2005 and it failed miserably. As The Guardian reported last year, a slew of multinational corporations took advantage of Bush’s plan to grant a one-time tax holiday to corporate tax avoiders, when he temporarily lowered the rate from 35 percent to 5 percent. But rather than fulfilling their roles as “job creators” after the windfall, these companies ended up using the repatriated cash to buy back its stock, which enriches the stock options owned by executives, while simultaneously firing workers:
Allan Sloan at the Washington Post reported that Ford Motor Company, which lobbied for the legislation, announced 30,000 additional job cuts after saving anywhere between $250m (Ford’s estimate) and $850m (Sloan’s estimate) in federal taxes. A 2005 New York Times editorial chided Hewlett Packard’s decision to fire 14,500 workers (a decision made by current presidential candidate Carly Fiorina) while repatriating $14.5bn in overseas profits.
While this is a widespread problem, there is a solution: Senator Bernie Sanders is campaigning on a promise to create 13 million new jobs by investing $1 trillion in rebuilding American infrastructure. He would fund this by closing the corporate tax loopholes that allow multinationals to stash an estimated $100 billion in overseas tax havens every year, amounting to $1 trillion in savings over a decade.
Jobs or corporate tax cuts? The choice is up to voters.