Cor­po­ra­tions paid 11.3% tax rate un­der 2017 law Fig­ure is low­est mea­sured by think tank since 1984

Orlando Sentinel - - BUSINESS - By Jeff Stein and Christo­pher In­gra­ham

WASHINGTON — About 400 of Amer­ica’s largest cor­po­ra­tions paid an av­er­age fed­eral tax rate of about 11% on their prof­its last year, roughly half the of­fi­cial rate es­tab­lished un­der Pres­i­dent Don­ald Trump’s 2017 tax law, ac­cord­ing to a re­port re­leased Mon­day.

The 2017 tax law low­ered the U.S. cor­po­rate tax rate from 35% to 21%, but in prac­tice large com­pa­nies of­ten pay far less than that be­cause of de­duc­tions, tax breaks and other loop­holes.

In the first year of the law, the amount cor­po­ra­tions paid in fed­eral taxes on their in­comes — their “ef­fec­tive rate” — was 11.3% on av­er­age, pos­si­bly its low­est level in more than three decades, ac­cord­ing to a re­port by the In­sti­tute on Tax­a­tion and Eco­nomic Pol­icy, a left-lean­ing think tank.

From 2008 to 2015, un­der the pre­vi­ous tax code, the cor­po­ra­tions’ ef­fec­tive rate was about 21%, ac­cord­ing to ITEP’s prior re­search.

The re­port also found that 91 cor­po­ra­tions in the For­tune 500, many worth bil­lions of dol­lars, paid no fed­eral taxes last year.

The find­ings come amid an ex­plo­sion in the fed­eral deficit, which this year rose to al­most $1 tril­lion. In Oc­to­ber, the U.S. Trea­sury Depart­ment an­nounced the deficit had grown $205 bil­lion, or 26%, in the past year, an un­usual oc­cur­rence dur­ing a pe­riod of strong eco­nomic growth.

Cor­po­rate tax rev­enue fell markedly dur­ing the first year of the tax law, from about $300 bil­lion in 2017 to $204 bil­lion in 2018, ac­cord­ing to fed­eral data, although it in­creased slightly from 2018 to 2019.

“When draft­ing the tax law, law­mak­ers could have elim­i­nated spe­cial breaks and loop­holes in the cor­po­rate tax to off­set the cost of re­duc­ing the statu­tory rate,” the re­port says. “In­stead, the new law in­tro­duced many new breaks and loop­holes, though it elim­i­nated some old ones.”

Repub­li­cans and con­ser­va­tive tax ex­perts con­tend the cut in cor­po­rate tax rates helped gen­er­ate eco­nomic growth and boost busi­ness in­vest­ment in the econ­omy.

Democrats, mean­while, main­tain the rate cut went too far and pri­mar­ily helped en­rich stock­hold­ers and cor­po­rate ex­ec­u­tives.

Many com­pa­nies said a big drop in cor­po­rate tax rates would al­low them to in­vest more in capital and equip­ment, but the uptick in new in­vest­ment ap­pears to have been short-lived. Much of the ex­tra capital went into record stock buy­backs, which in­crease share prices with­out re­quir­ing new in­vest­ment or hir­ing.

The 91 prof­itable For­tune 500 cor­po­ra­tions that paid no fed­eral tax in 2018 earned a com­bined $101 bil­lion last year. As a group, their ef­fec­tive fed­eral tax rate was -5.9%, mean­ing many of them re­ceived a fed­eral tax re­fund on top of their prof­its.

Those pay­ing no fed­eral tax in­clude many house­hold names: Online re­tailer Ama­zon, for in­stance, re­ceived a $129 mil­lion re­bate on $10.8 bil­lion in prof­its, pri­mar­ily be­cause of how the tax code treats stock op­tions in pay pack­ages.

The 11.3% fig­ure is the low­est ef­fec­tive cor­po­rate tax rate ITEP has found since it started eval­u­at­ing this data in 1984.

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