The corporate minimum tax could hit these ultra-profitable companies - The Washington Post

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Updated August 12, 2022 at 7:20 p.m. EDT|Published

August 11, 2022 at 6:00 a.m. EDT

Cash effective tax rates

of most-profitable companies since 2019

’19

’20

’21

13%

10%

9%

8%

7%

6%

5%

5%

Bank of America

Amazon

Berkshire Hathaway, Amazon and Intel paid less than 15 percent in taxes globally in each of the last three years

’19

’20

’21

11%

11%

10%

10%

10%

15%

9%

Verizon

Intel

Wells Fargo

’19

’20

’21

15%

15%

14%

10%

15%

Comcast

Citigroup

Tech companies including Alphabet

lower their tax bills by reporting income

in countries with lower rates

’19

’20

’21

13%

15%

Meta (Facebook)

Microsoft

’19

’20

’21

15%

Procter & Gamble

’19

’20

’21

14%

12%

15%

Goldman Sachs

Apple

Home Depot

’19

’20

’21

14%

15%

Walmart

Source: Washington Post analysis

of Calcbench data

Cash effective tax rates

of most-profitable companies since 2019

’19

’20

’21

13%

10%

9%

8%

7%

6%

5%

5%

Bank of America

Amazon

Berkshire Hathaway, Amazon and Intel paid less than 15 percent in taxes globally in each of the last three years

’19

’20

’21

11%

11%

10%

10%

10%

9%

15%

Verizon

Intel

Wells Fargo

’19

’20

’21

15%

15%

14%

10%

15%

Comcast

Citigroup

Alphabet (Google)

Tech companies including Alphabet lower their tax bills by reporting income in countries with lower rates

’19

’20

’21

13%

15%

Meta (Facebook)

Microsoft

’19

’20

’21

15%

Procter & Gamble

Morgan Stanley

’19

’20

’21

14%

12%

15%

Apple

Home Depot

Goldman Sachs

’19

’20

’21

14%

15%

JPMorgan Chase

Walmart

Source: Washington Post analysis of Calcbench data

Cash effective tax rates

of most-profitable companies since 2019

2019

2020

2021

13%

11%

10%

10%

10%

10%

9%

9%

8%

7%

6%

5%

5%

Berkshire Hathaway

Bank of America

Amazon

Verizon

Intel

Berkshire Hathaway, Amazon and Intel paid less than

15 percent in taxes globally in each of the last three years

2019

2020

2021

15%

15%

14%

15%

11%

10%

Wells Fargo

Comcast

Citigroup

Alphabet (Google)

Tech companies including Alphabet lower their tax bills by reporting income in countries with lower rates

2019

2020

2021

13%

15%

Meta (Facebook)

Microsoft

Johnson & Johnson

Procter & Gamble

Morgan Stanley

2019

2020

2021

14%

14%

12%

15%

Apple

Home Depot

JPMorgan Chase

Walmart

Goldman Sachs

Source: Washington Post analysis of Calcbench data

Cash effective tax rates

of most-profitable companies since 2019

2019

2020

2021

13%

11%

10%

10%

10%

10%

9%

9%

8%

7%

6%

5%

5%

Berkshire Hathaway

Bank of America

Amazon

Verizon

Intel

Berkshire Hathaway, Amazon and Intel paid less than 15 percent in taxes globally in each of the last three years

2019

2020

2021

15%

15%

14%

11%

10%

15%

Wells Fargo

Comcast

Citigroup

Alphabet (Google)

Unitedhealth Group

Tech companies including Alphabet lower their tax bills by reporting income in countries with lower rates

2019

2020

2021

13%

15%

Meta (Facebook)

Microsoft

Johnson & Johnson

Procter & Gamble

Morgan Stanley

2019

2020

2021

14%

14%

12%

15%

Goldman Sachs

Apple

Home Depot

JPMorgan Chase

Walmart

Source: Washington Post analysis of Calcbench data

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correction

A previous version of this article incorrectly included Union Pacific in the table of profitable companies with low taxes rates because of an error in the source data. Its cash effective tax rate for the last three years is 18 percent.

On Friday the House passed the Inflation Reduction Act, which includes a minimum tax rate of 15 percent on highly profitable companies — a levy that could hit Amazon, Verizon and others. The tax would help pay for large investments across climate and health care.

But the minimum tax conflicts with a hallmark of corporate taxes in America: deductions and credits ratified by Congress.

Tax credits and deductions are purposefully designed as tools to incentivize certain behaviors. But because they reduce companies’ tax bills, they stand to chip away at the effectiveness of a minimum tax. Companies can still use carve-outs for research and development, investment expenses and others to lower their tax bills. Democrats’ marquee climate proposal comes in the form of tax breaks — which are also exempted from the corporate minimum tax rate.

Because of these exemptions, it would remain possible for profitable corporations to achieve a tax rate below 15 percent, Daniel Bunn, executive vice president at the Tax Foundation, said in an email.

The minimum tax proposal would raise $220 billion over 10 years, according to the Joint Committee on Taxation, a nonpartisan congressional body that analyzes tax bills. The minimum tax rate would apply to companies that reported to shareholders an annual average of $1 billion in annual profit over three years.

More than 250 companies in the S&P 500 averaged more than $1 billion in pretax income over the last three years, according to a Washington Post analysis of Calcbench data. Of those, 83 paid less than 15 percent in income tax globally. The list includes tech companies such as Amazon and Intel, banks like Bank of America and U.S. Bancorp, telecom giants Verizon and AT&T, and other household names like General Motors and UPS.

The rate is calculated according to global income, meaning a company could, in theory, “have a domestic effective tax rate below 15 percent as long as their foreign profits were taxed higher,” Kyle Pomerleau, a senior fellow at the American Enterprise Institute, said in an email.

President Biden frequently notes that 55 profitable corporations paid no federal income tax in 2020, according to an analysis by the Institute on Taxation and Economic Policy, a liberal think tank.

The talking point sidesteps that companies often pay different amounts in taxes year-to-year. But it points to a truism that Democrats aim to fix: Over the long run, many companies pay less than the current standard corporate tax rate of 21 percent.

Some corporations avoid federal income taxes by redirecting revenue to countries where they operate with lower tax rates. Until the end of 2019, Google’s parent company, Alphabet, licensed its own intellectual property from Bermuda — an offshore tax haven. Alphabet reported its global effective tax rate in 2018 and 2019 was lowered by billions because “substantially all” of its foreign income was earned by its Irish subsidiary, according to a securities filing.

Corporations also lower their taxes through deductions and credits. Amazon shaved $3 billion off its tax bills from 2019 to 2021 through its use of stock-based compensation and another $2.2 billion for other tax credits including one for research and development, according to securities filings. The company reported federal tax expenses of $4.1 billion for those years on $69.4 billion in pretax U.S. profit — an effective federal rate of less than 6 percent. (Amazon founder Jeff Bezos owns The Post.)

To gain the support of Sen. Kyrsten Sinema (D-Ariz.), Democrats amended their minimum rate proposal to exclude deductions for certain investments and exempt firms owned by private equity. Those last-minute changes will further help some ultra-profitable corporations to pay less than the minimum rate.

This analysis relied on data from Calcbench, pulled from company filings to the Securities and Exchange Commission. The chart shows cash-effective tax rates (tax expense divided by pretax income). The chart includes the 20 most profitable companies in recent years that disclosed enough numbers to make the calculation.

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