Biden proposals may not guarantee all Fortune 500 corporations pay federal income taxes, experts say
Faced with criticism over their proposed tax hikes, senior Biden officials have in recent days pointed to large American corporations that are paying no federal income taxes.
Earlier this month, White House press secretary Jen Psaki cited a thinktank report showing 55 companies in the Fortune 500 had paid $0 in U.S. corporate taxes in 2020. That study has also been repeatedly cited by both Transportation Secretary Pete Buttigieg, who called the lack of payment by dozens of megafirms “unacceptable,” as well as by the president himself.
“You have 51 or 52 corporations of the Fortune 500 [that] haven’t paid a single penny in taxes for three years,” Biden told reporters last week. “Come on, man. Let’s get real.”
Under Biden’s plan, corporations would pay at least $2 trillion more in taxes than they do currently. But tax experts are not sure whether Biden’s plan would in fact substantially reduce the number of large corporations paying zero dollars in federal income taxes.
That is because Biden’s plan would still allow virtually all corporations to use federal tax credits and deductions to reduce their existing tax obligations one key reason some large firms currently pay nothing. Biden’s $2 trillion jobs and infrastructure plan includes a significant expansion in these kinds of credits, such as for clean energy investments, that corporations use to zero out what they owe the Internal Revenue Service. Additionally, the Biden administration dramatically narrowed its proposal to ensure large firms pay at least some federal taxes, muting its impact by having it only apply to a sliver of firms.
“Biden’s proposals won’t eliminate the phenomenon of large firms paying $0,” said Kyle Pomerleau, a tax expert at the American Enterprise Institute, a conservative-leaning think-tank. “I am skeptical this plan will put a big dent in the number of companies paying nothing.”
White House officials did not deny that some large firms under their plan could still pay no federal taxes, but said that far fewer would compared to current law. They stressed that Biden’s plan would raise far more money from corporate America - as much as $2.5 trillion over a 15-year period - than is now the case.
Under Biden’s plan, corporations would face a significantly higher domestic tax rate of 28% and a far steeper tax rate on earnings overseas. The plan also includes aggressive measures to prevent multinational corporations by artificially reducing their U.S. tax base by shifting profits overseas. Administration officials said their plans would end international tax avoidance by multinational firms and create a much fairer tax system overall.