Blog: Study Finds Many Profitable Corporations Pay Little or No U.S. Income Taxes

Publication Date: 
February 27, 2014

Chris LilienthalCross posted at Third and State

One would think that all profitable Fortune 500 companies in the United States are paying some amount in federal income taxes. And one would be wrong.

A five-year study of 288 highly profitable Fortune 500 companies found that 111 of them, including six based in Pennsylvania, paid no federal corporate income tax in at least one of the last five years. In fact, 26 companies, including Boeing, General Electric, and Verizon, enjoyed negative income tax rates over the entire 2008-2012 period, despite combined pre-tax profits of $170 billion. Overall, one-third of the corporations studied paid a U.S. tax rate of less than 10% over the five-year period.

We have this new info courtesy of the good folks at Citizens for Tax Justice (CTJ) and the Institute on Taxation and Economic Policy (ITEP) who crunched the numbers. They limited their review to every Fortune 500 company that was profitable each year of the study and provided sufficient, reliable information in their financial reports to allow calculation of their effective U.S. and foreign tax rates. Although the statutory corporate federal income tax rate is 35%, these corporations paid an average effective rate of just 19.4% over the past five years, barely more than half the official rate.

Six of the 16 Pennsylvania-based Fortune 500 corporations included in the study paid federal income taxes of zero or less in at least one year between 2008 and 2012: Allentown-based PPL (3 years); Pittsburgh-based Allegheny Technologies and PNC Financial Services Group (2 years); and King of Prussia-based UGI, Pittsburgh-based H.J. Heinz, and Allentown-based Air Products & Chemical (1 year). All six companies paid overall effective tax rates of 15% or less.

It is important to acknowledge thoese companies that are paying closer to their fair share, including six in Pennsylvania paying effective federal income tax rates of 20% or more: Hershey (31.6%), King of Prussia-based Universal Health Services (31.1%), Pittsburgh-based PPG Industries (29.2%), Coraopolis-based Dick’s Sporting Goods (27.2%), Chesterbrook-based AmerisourceBergen (24%), and Philadelphia-based Comcast (24%).

The report outlines a set of sensible reform options that could help revitalize the federal corporate income tax, including ending the indefinite deferral of taxes in foreign profits and tax breaks for executive stock options.

Check out the Pennsylvania Budget and Policy Center's press release or the full CTJ/ITEP report for more.