Big corporations use loopholes to dodge taxes, report says
WASHINGTON - Many of this country’s biggest companies paid no federal taxes — or even made money through credits and refunds from the government — over the past three years by using an array of loopholes and tax breaks, according to a report released yesterday.
The authors examined the finances of 280 corporations from 2008 through 2010 and found that 30 paid no tax or used loopholes to wind up with negative tax rates.
Under the federal tax code, corporations are supposed to pay 35 percent of their profits in taxes. But the study found many companies used legal tax breaks that allowed them to pay lower rates than ordinary Americans.
The report, compiled by the nonprofits Citizens for Tax Justice and the Institute on Taxation and Economic Policy, was published as corporations and White House officials have pushed for a reform of the corporate tax code. Powerful business lobbying groups, including the Business Roundtable, have said they want lawmakers to lower the overall 35 percent tax rate in exchange for closing some loopholes. These lobbyists frequently cite this rate when arguing that US firms pay more than their foreign competitors.
Some corporations pushed back at the report, saying it relied on fuzzy accounting.
The “findings in this and other recent reports have been more politically motivated than truthful,’’ said Robert Varettoni, a spokesman for Verizon, which was cited in the report for having a negative 3 percent rate from 2008 through 2010. “The fact is, Verizon fully complies with all tax laws and pays its fair share of taxes.’’
The report said that 71 of the companies paid an effective rate of more than 30 percent over the three years. But roughly an equal number paid less than 10 percent.
The range between industries is wide. Retail and health-care companies, in particular, tend to pay more in taxes. These firms usually have less intellectual property that can be shifted overseas to take advantage of other countries’ lower tax rates. The report found they paid an effective rate of 30 percent over the three years.
By contrast, tech companies and manufacturers, including General Electric, paid far less. GE, for instance, paid a rate of minus 45 percent, the report said. GE did not respond to requests for comment.
The paper also noted that defense contractors paid notably low rates, averaging about 15 percent.
Gas and electric utilities also tend to pay less. Last year, Pepco Holdings, a utility serving the Washington area, made $229 million in profits and claimed $270 million in tax credits, making the company’s tax rate about minus 118 percent.
Bob McIntyre, a co-author of the study and director of the Center for Tax Justice, said it was hard to tell from Pepco’s annual financial filings how it managed to lower its taxes by so much. But it appeared that much of the savings came from “accelerated depreciation,’’ a tax rule that allows companies to write off their capital investments faster than they wear out. Companies can then deduct from their taxable income the falling value of these investments.
The report said that many other companies took advantage of tax breaks that favor certain industries, including drilling for oil and gas, making video games, building NASCAR racetracks, producing ethanol, and making movies.
By Jia Lynn Yang | Washington Post / Boston.com