Democrats’ minimum tax proposal could hit these ultra-profitable corporations

Chart showing the U.S. federal income tax rates paid by profitable corporations

Effective federal income tax rates

of most-profitable companies since 2018

’18

’19

’20

Proposed

min. 15%

15%

14%

13%

13%

11%

9%

3%

1%

0%

0

Amazon

Verizon

Alphabet (Google)

Amazon is the most-profitable company to pay no federal income tax in a recent year

’18

’19

’20

15%

13%

15%

10%

9%

9%

7%

0

Intel

Morgan Stanley

Comcast

>50%

’18

’19

’20

15%

13%

11%

9%

9%

0

JPMorgan Chase

PepsiCo

Procter & Gamble

Facebook’s 2019 rate jumped in part because its $5 billion FEC settlement was not tax deductible

’18

’19

’20

>50%

>50%

14%

15%

11%

0

Facebook

Walmart

Coca-Cola

’18

’19

’20

15%

0

Home Depot

Amgen

Visa

Some companies paid temporarily high rates after a 2017 tax law encouraged repatriation of foreign earnings

’18

’19

’20

>50%

>50%

>50%

15%

0

Johnson & Johnson

Cisco

Microsoft

’18

’19

’20

>50%

>50%

15%

0

Apple

Oracle

Source: Washington Post analysis of SEC filings

Effective federal income tax rates

of most-profitable companies since 2018

2018

2019

2020

Proposed

min. 15%

15%

14%

13%

13%

11%

9%

3%

1%

0%

0

Amazon

Verizon

Alphabet (Google)

Amazon is the most-profitable company

to pay no federal income tax in a recent year

2018

2019

2020

15%

13%

15%

10%

9%

9%

7%

0

Intel

Morgan Stanley

Comcast

>50%

2018

2019

2020

13%

11%

15%

9%

9%

0

JPMorgan Chase

PepsiCo

Procter & Gamble

Facebook’s 2019 rate jumped in part because its

$5 billion FTC settlement was not tax deductible

2018

2019

2020

>50%

>50%

14%

15%

11%

0

Facebook

Walmart

Coca-Cola

2018

2019

2020

15%

0

Home Depot

Amgen

Visa

Some companies paid temporarily high rates after a 2017 tax law encouraged repatriation of foreign earnings

2018

2019

2020

>50%

>50%

>50%

15%

0

Johnson & Johnson

Cisco

Microsoft

2018

2019

2020

>50%

>50%

15%

0

Apple

Oracle

Source: Washington Post analysis of SEC filings

Effective federal income tax rates

of most-profitable companies since 2018

2018

2019

2020

Proposed

min. 15%

15%

15%

14%

13%

13%

13%

11%

9%

9%

9%

3%

1%

0%

0

Amazon

Verizon

Alphabet (Google)

Morgan Stanley

Comcast

Amazon is the most-profitable company

to pay no federal income tax in a recent year

>50%

>50%

2018

2019

2020

13%

11%

15%

11%

10%

9%

9%

7%

0

Intel

JPMorgan Chase

PepsiCo

Procter & Gamble

Coca-Cola

Facebook’s 2019 rate jumped in part because its $5 billion FTC settlement was not tax deductible

2018

2019

2020

>50%

14%

15%

0

Facebook

Walmart

Home Depot

Amgen

Visa

Some companies paid temporarily high rates after a 2017 tax law encouraged repatriation of foreign earnings

2018

2019

2020

>50%

>50%

>50%

>50%

>50%

15%

0

Johnson & Johnson

Cisco

Microsoft

Apple

Oracle

Source: Washington Post analysis of SEC filings

Effective federal income tax rates

of most-profitable companies since 2018

2018

2019

2020

Proposed

min. 15%

15%

15%

14%

13%

13%

13%

11%

9%

9%

9%

3%

1%

0%

0

Amazon

Verizon

Alphabet (Google)

Morgan Stanley

Comcast

Amazon is the most-profitable company

to pay no federal income tax in a recent year

>50%

>50%

2018

2019

2020

13%

11%

11%

15%

10%

9%

9%

7%

0

Intel

JPMorgan Chase

PepsiCo

Procter & Gamble

Coca-Cola

2018

2019

2020

Facebook’s 2019 rate jumped in part because its $5 billion FTC settlement was not tax deductible

>50%

14%

15%

0

Facebook

Walmart

Home Depot

Amgen

Visa

Some companies paid temporarily high rates after a 2017 tax law encouraged repatriation of foreign earnings

2018

2019

2020

>50%

>50%

>50%

>50%

>50%

15%

0

Johnson & Johnson

Cisco

Microsoft

Apple

Oracle

Source: Washington Post analysis of SEC filings

The House passed President Biden’s Build Back Better legislation Friday, which includes a minimum federal tax rate of 15 percent on highly profitable companies — a levy that could hit Amazon, Verizon and others. The minimum is one of several revenue raisers to help pay for the $2.4 trillion spending bill with large investments across climate, education and health care.

But the proposed minimum could conflict 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 could still use credits for research, child care, clean energy and other categories to lower their tax bills, potentially below the minimum rate.

Democrats’ marquee climate proposal similarly comes in the form of tax breaks — which are expected to be exempted from the corporate minimum tax rate.

Infrastructure, spending bills could see House vote Friday as Democrats push ahead

In 2020, 55 profitable corporations paid no federal income tax, according to an analysis by the Institute on Taxation and Economic Policy, a progressive think tank. President Biden noted the statistic when first announcing his budget plan, saying “If they report big profits to their shareholders, they should be paying taxes. It’s that simple.”

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

The minimum tax proposal would raise nearly $320 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. Last year 241 companies in the S&P 500 reported more than $1 billion in pretax income, according to a Washington Post analysis of Bloomberg data. Three in 10 paid less than 15 percent in income tax globally.

As IRS audits waned, big businesses racked up unapproved tax breaks

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.

Ireland’s 12.5 percent corporate tax rate has long attracted large U.S. firms, but a new global minimum tax aims to halt such tax avoidance. Under the House bill, companies would be charged a separate 15 percent minimum tax per country on foreign earnings.

Corporations also lower their taxes through deductions and credits. Amazon has shaved $3 billion off its tax bills from 2018-2020 through its use of stock-based compensation and another $1.5 billion for other tax credits including one for research and development, according to securities filings. The company reported federal tax expenses of $1.9 billion for those years on $44.7 billion in pretax U.S. profit — an effective rate of less than 5 percent. (Amazon founder Jeff Bezos owns The Washington Post.)


About this story

This analysis relied on data from Bloomberg and information culled directly from company filings to the SEC. The chart uses the Institute on Taxation and Economic Policy’s method of calculating an effective federal tax rate by dividing money the company set aside for federal taxes by the amount it reported earning in the U.S. pretax (minus state and local taxes). For companies that only report combined federal, state and local numbers, the combined numbers were used. The chart includes the 20 most profitable companies in recent years that disclosed enough numbers to make the calculation.

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