Corporate minimum tax could hit these ultra-profitable companies – The Washington Post | Vette Leader


Cash Tax Rates

most profitable companies since 2019

Berkshire Hathaway, Amazon and Intel have each paid less than 15 percent in taxes worldwide over the past three years

Tech companies like Alphabet

lower their tax bills by reporting income

in counties with lower rates

Source: Washington Post analysis

of Calcbench data

Cash Tax Rates

most profitable companies since 2019

Berkshire Hathaway, Amazon and Intel have each paid less than 15 percent in taxes worldwide over the past three years

Technology companies like Alphabet lower their tax bills by reporting income in counties with lower tax rates

Source: Washington Post analysis of Calcbench data

Cash Tax Rates

most profitable companies since 2019

Berkshire Hathaway, Amazon and Intel paid less than

15 percent in taxes worldwide in each of the last three years

Technology companies like Alphabet lower their tax bills by reporting income in counties with lower tax rates

Source: Washington Post analysis of Calcbench data

Cash Tax Rates

most profitable companies since 2019

Berkshire Hathaway, Amazon and Intel have each paid less than 15 percent in taxes worldwide over the past three years

Technology companies like Alphabet lower their tax bills by reporting income in counties with lower tax rates

Source: Washington Post analysis of Calcbench data

Placeholder when loading item promotions

The House of Representatives is expected to pass the Anti-Inflation Act on Friday, which would impose a minimum tax rate of 15 percent on highly profitable companies — a tax that could hit Amazon, Verizon and others. The tax would help fund large investments in climate and health.

But the minimum tax clashes with a hallmark of corporate taxes in America: deductions and credits ratified by Congress.

Tax credits and deductions are specifically designed as tools to incentivize certain behaviors. But because they lower the corporate tax burden, they can reduce the effectiveness of a minimum tax. Businesses can still use carve-outs for research and development, capital expenditures, and others to lower their tax burden. The Democrats’ marquee climate proposal comes in the form of tax breaks — which are also exempt from the corporate minimum tax rate.

Democrats are enjoying the spending bill — and some are telling voters they want to do more

Because of these exceptions, profitable companies would still be able to achieve a tax rate below 15 percent, Daniel Bunn, executive vice president of the Tax Foundation, said in an email.

The minimum tax proposal would raise $220 billion over 10 years, according to the Joint Committee on Taxation, a nonpartisan congressional body that analyzes tax laws. The minimum tax rate would apply to companies that report $1 billion in average annual earnings to shareholders over three years.

More than 250 companies in the S&P 500 have averaged more than $1 billion in pretax revenue over the past three years, according to a Washington Post analysis of Calcbench data. Of these, 84 paid less than 15 percent global income tax. The list includes tech companies like Amazon and Intel, banks like Bank of America and US Bancorp, telecom giants Verizon and AT&T, and other household names like General Motors and UPS.

The rate is calculated on global income, meaning a company could theoretically “have an effective domestic tax rate below 15 percent as long as its foreign profits were taxed more,” said Kyle Pomerleau, a senior fellow at the American Enterprise Institute, in an E -Mail.

The two-week scramble that saved the Democrats’ climate agenda

President Biden frequently notes that 55 profitable companies paid no federal income tax in 2020, according to an analysis by the Institute on Taxation and Economic Policy, a liberal think tank.

The fact that companies often pay different amounts in taxes from year to year is avoided. But it points to a truism Democrats want to correct: Many companies pay less than the current standard corporate tax rate of 21 percent over the long term.

Some companies avoid federal income taxes by diverting revenue to countries where they operate with lower tax rates. By the end of 2019, Google’s parent company Alphabet licensed its own intellectual property from Bermuda – an offshore tax haven. Alphabet reported that its global effective tax rate was reduced by billions in 2018 and 2019 because “substantially all” of its foreign income was derived from its Irish subsidiary, according to a securities filing.

Businesses also lower their taxes through deductions and credits. According to securities filings, Amazon saved $3 billion on its tax bills from 2019 to 2021 by using stock-based compensation and another $2.2 billion on other tax credits, including one for research and development. The company reported federal tax expenditures of $4.1 billion for those years on pretax US income of $69.4 billion — an effective federal tax rate of less than 6 percent. (Amazon founder Jeff Bezos owns The Post.)

To gain the support of Sen. Kyrsten Sinema (D-Ariz.), Democrats amended their proposed minimum rate to eliminate deductions for certain investments and exempt private equity-owned firms. These last-minute changes will further help some ultra-profitable companies pay below the minimum rate.

This analysis was based on Calcbench data pulled from company filings with the Securities and Exchange Commission. The graphic shows the cash tax rates (tax expenses divided by earnings before taxes). The chart includes the 20 most profitable companies over the past few years that have disclosed enough numbers to do the calculation.

Leave a Comment