Shoppers look forward to Black Friday all year round – the money-saving deals, the almost unfair price reductions, and the seemingly absurd deals on the season’s hottest holiday gifts. Americans love a good steal. But, if you think you made out like a bandit on Black Friday, consider the deals corporations receive when they pay their taxes.
A number of responsible companies pay a third or more of their profits in federal income taxes that help pay for schools, roads, water systems, national security, courts, national parks, and much more. However, too many companies pay far less and some pay nothing at all despite reporting billions of dollars in profits. On average, America’s large corporations pay just 12.6 percent of their income in taxes, a hefty markdown from “full price” – 35 percent.
Corporate CEOs and their high-priced lobbyists have won so many loopholes and tax perks that the U.S. tax code now runs to 73,954 pages. One of the most popular arguments used to win these lucrative tax breaks is that lowering taxes will create jobs. My organization, the Center for Effective Government, tested this thesis in a new report titled The Corporate Tax Rate Debate: Lower Taxes on Corporate Profits Not Linked to Job Creation. We looked at the companies with the highest and lowest effective tax rates between 2008 and 2010 to see how many jobs they created or shed. The 60 firms we examined were profitable in each of the three years.
The 30 firms with the highest corporate rates all paid more than a third of their profits in federal income taxes. Collectively, they added nearly 200,000 jobs over the last five years. Twenty-two of the high-tax companies added jobs, led by UnitedHealth Group, Lowes, and Whole Foods Market.
Among the 30 firms with the lowest effective tax rate, only two paid taxes over the three years studied; the rest used loopholes to claim refunds even though they were profitable. Half of the 30 low-tax firms shed jobs; the other half added jobs. Together, they shed more than 51,000 jobs, led by America’s largest wireless carrier, Verizon.
Large corporations have been receiving hefty mark-downs on their taxes for a long time. In the 1950s, corporate income taxes paid about a third of the federal’s government’s bills; last year, they paid less than a tenth. As corporations have paid less to support public services, America’s middle class has made up the difference with higher individual and payroll taxes, and with cuts to public services prompted by a period of sustained government budget cutting.
When we allow corporations to use hefty discounts from loopholes and other tax perks, we have to mark-down the public services on which we all depend.
A door-buster bargain that cuts taxes for firms like General Electric, Wells Fargo, and Honeywell and furloughs United States Department of Agriculture food inspectors makes the food on our family’s table a little riskier. Cuts in corporate taxes that roll back the number of teachers in our kids’ classrooms leaves them less prepared to capture opportunities and contribute to the economy. And price-buster cuts in corporate taxes that force our nation’s crumbling bridges to go another year without repair undermine the distribution networks on which American businesses rely.
As public services suffer, corporate taxes are near Post-World War II lows. Corporate profits as a share of our economy are at 65-year highs, while corporate taxes as a share of the economy are near 65-year lows. Over the last year, the federal government shed 94,000 jobs; state and local governments shed hundreds of thousands more.
The U.S. remains the richest country in the history of the world. There’s money to operate the best schools in the world, to make our roads and bridges world class, and to extend our leadership in medical and technological leadership. But doing these things will require that we demand that our most profitable corporations pay their fair share.
Responsible corporations can pay a third of their profits in federal taxes and still invest in their businesses right here at home, creating thousands of new jobs. We’ve got a list of 22 Fortune 500 companies who have done just that. It’s time to stop Black Friday tax discounts for the ones who don’t. These discounts are a bad bargain for the rest of us.