The Nation has an article that details half a dozen accounting tricks that corporations use to avoid paying federal income taxes. Those techniques are so successful, and the forms of corporate welfare in the tax code so generous, that corporations are paying less in taxes now than they have in the last four decades.
As American families rush to complete their annual tax returns, many will have paid more in federal income taxes than some of America’s largest and most profitable corporations. AT&T, Boeing, Citigroup, Duke Energy and Ford collectively reported more than $20 billion of US pre-tax income last year, yet none of them paid a dime in federal income taxes. Instead, they claimed refunds of more than $1.3 billion from the IRS.
These corporations are not alone in turning tax dodging into a competitive sport. Last year, US corporations paid an effective tax rate of just 12.1 percent, the lowest level in the last forty years, according to the Congressional Budget Office. Sixty years ago, when Republican President Dwight Eisenhower lived in the White House, corporations paid 32 percent of federal government’s tax receipts; last year they paid 9 percent.
Here’s one example:
In each of the past nine years, Boeing has reported at least $1 billion in pre-tax profits, yet in only one did it pay any US corporate income taxes. In fact, the aerospace giant got so much money in tax subsidies that it had an effective tax rate of -7.8 percent during this period.
One of the main reasons Boeing has avoided the taxman is that the rest of us subsidize their research and development spending. Last year this amounted to $137 million. Congress first passed the research and experimentation tax credit during the 1981 recession, intending to provide a temporary boost to America’s sagging economy. Though it has expired for short periods over the years, it has been renewed thirteen times, and Congress is presently considering making the tax credit permanent.
Government investment in basic research and development can be valuable, but the way the current tax credit is structured, much of the support goes to large well-resourced high-tech firms like Boeing that would have conducted the research anyway as a part of maintaining a vibrant business.
So taxpayers foot the bill for Boeing’s research on new defense technology, then Boeing makes all the profits on it after taxpayers pay again for the planes and other weapons that are developed because of that research. This is a perfect example of corporate welfare, which dwarfs actual welfare for individuals.