David
Leonhardt of The New York Times says: Corporate
Taxes Are Wealth Taxes. He adds: "And their
decline has led to a steep drop in tax rates for the affluent."
I will say little about these two claims. Since the "corporate tax" is based on income, not strictly wealth (or assets), Leonhardt's word usage is very sloppy. Wealth and high income are much correlated. Thus a tax on wealth and a tax on income tax the same people (or businesses), but that is no excuse for such sloppiness. Secondly, corporate income taxes paid in part have fallen due to the base rate being cut from 35% to 21% effective 2018. Also, there are all the new tax subsidies created by legislation passed in response to the pandemic.
My focus instead will be on Leonhardt's saying: "[A]t least 55 big companies paid
zero federal income taxes last year, according to the
Institute on Taxation and Economic Policy. Among them:
Archer-Daniels-Midland, Booz Allen Hamilton, FedEx, HP, Interpublic,
Nike and Xcel Energy."
Leonhardt thus relied on the deeply flawed reporting of
the Institute on Taxation and Economic Policy (ITEP). ITEP
consistently (a) treats GAAP accounting numbers as if they
are cash taxes paid, and (b) ignores the cash paid for income taxes
explicitly stated in corporate 10-Ks. I have written about these
several times in the past:
ITEP
and income taxes for 3 banks In
the wake of ITEP’s report
ITEP
and three tax topics ITEP
makes a myth
Amazon
income taxes addenda Amazon 2019, ITEP and its wake
Netflix
income taxes 2018
I also looked at the 10-Ks of three of the companies named above
in Leonhardt's article to show ITEP's falsehoods and propagandizing.
Archer
Daniels Midland
ITEP: "Food
conglomerate Archer Daniels Midland enjoyed $438 million of U.S.
pretax income last year and received a federal tax rebate of $164
million."
ITEP
ignored ADM's
10-K (p.
61) that explicitly says cash payments for corporate income taxes were $195 million.
Also, the $164 million is not a
cash rebate. It is the (negative) GAAP expense provision based on
GAAP pre-tax income for 2020. ITEP also ignored the $41 million deferred
part of ADM's GAAP provision for income tax for 2020. It compensates
for accelerated tax deductions taken in prior years to be reversed
with paying higher taxes thereafter, part of it in 2020.
FedEx
ITEP:
"The delivery giant FedEx zeroed out its federal
income tax on $1.2 billion of U.S. pretax income in 2020 and received
a rebate of $230 million."
ITEP
ignored FedEx's
10-K (p.
144) that explicitly says cash payments for corporate income taxes were $389 million.
Also, the $230 million is not a
cash rebate. It is the (negative) GAAP expense provision based
on GAAP pre-tax income for 2020. ITEP also ignored the $475 million
deferred part of GAAP provision for income tax for 2020. It
compensates for accelerated tax deductions taken in prior years to be
reversed with paying higher taxes thereafter, part of it in 2020.
Nike
ITEP: "The
shoe manufacturer Nike didn’t
pay a dime of federal income tax on almost $2.9 billion of U.S.
pretax income last year, instead enjoying a $109 million tax rebate."
ITEP ignored Nike's 10-K (p. 59) that explicitly says cash payments for corporate income taxes were $1,028 million.
Also, the $109 million is not a
cash rebate. It is the (negative) GAAP expense provision based
on GAAP pre-tax income for 2020. ITEP also ignored the deferred part
of GAAP provision for income tax for 2020. It compensates for
accelerated tax deductions taken in prior years to be reversed with
paying higher taxes thereafter, part of it in 2020.
