The figure above highlights the incredibly low rates that these 19 corporations are paying. However, this issue extends beyond the Fortune 100: Other large, notable companies pay similarly low rates. The fact that massive and highly profitable corporations are not paying their fair share is a further illustration of how the corporate tax reforms proposed by President Joe Biden are urgently needed.
Fortune 100 companies benefiting from the current tax system
Corporations such as AT&T, Charter Communications, American International Group (AIG), and Dow reported that they will pay negative effective federal income tax rates on their U.S. profits for 2021, effectively enjoying tax refunds instead. (see Methodology for more details on these tax rate calculations)
- AT&T reported that it will pay no federal income taxes in 2021, despite $29.6 billion in earnings. The company reported a tax refund—or an income tax benefit—of $1.2 billion.*
- Charter Communications, with brands like Spectrum, reported that it will pay no federal income taxes in 2021, despite $6 billion in earnings. The company reported a tax refund of $12 million.
- AIG reported that it will pay no federal income tax for 2021, despite $9.8 billion in earnings. The company reported a tax refund of $216 million.
- Dow Inc. reported that it will pay no federal income taxes in 2021, despite $1.5 billion in earnings. The company reported a tax refund of $46 million.
These are some of the largest companies in the world, pulling in billions of profits; yet none will owe a cent in federal income taxes. The tax rate for large corporations is nominally 21 percent—down from 35 percent because of the Tax Cuts and Jobs Act (TCJA) of 2017. But as their investor filings show, many corporations pay a much lower actual—or “effective”—rate on their profits because of the many ways they can reduce their taxable income under the current tax system. The low tax rates for these companies worsen an already unjust increase in inequality.
Fortune 100 companies with effective tax rates of less than 10 percent
Meanwhile, huge, highly profitable corporations such as Amazon, ExxonMobil, Microsoft, JPMorgan Chase, Verizon, FedEx, Ford, General Motors (GM), Bank of America, Chevron, UPS, MetLife, Merck, Nike, and Coca-Cola all enjoyed effective tax rates of less than 10 percent—or less than half the federal statutory rate.
- Amazon’s effective federal income tax rate was 6.1 percent in 2021, with $35.1 billion in U.S. earnings and $2.1 billion in federal income taxes.
- ExxonMobil’s effective federal income tax rate was 2.8 percent in 2021, with $9.3 billion in U.S. earnings and $236 million in federal income taxes.
- Microsoft’s effective federal income tax rate was 9.7 percent in 2021, with $33.7 billion in U.S. earnings and $3.3 billion in federal income taxes.
- JP Morgan Chase’s effective federal income tax rate was 5.9 percent in 2021, with $48.2 billion in U.S. earnings and $2.9 billion in federal income taxes.
- Verizon’s effective federal income tax rate was 6.9 percent in 2021, with $27.2 billion in U.S. earnings and $1.9 billion in federal income taxes.
- Ford’s effective federal income tax rate was 1 percent in 2021, with $10 billion in U.S. earnings and only $100 million in federal income taxes.
- GM’s effective federal income tax rate was 0.2 percent in 2021, with $9.4 billion in U.S. earnings and only $20 million in federal income taxes.
- Chevron paid only $174 million in federal income taxes, earning $9.5 billion last year. That’s an effective federal income tax rate of only 1.8 percent.
- Bank of America’s effective federal income tax rate was 3.5 percent in 2021, with $31 billion in U.S. earnings and only $1.1 billion in federal income taxes.
- UPS’ effective federal income tax rate was 9.9 percent in 2021, with $14 billion in U.S. earnings and $1.4 billion in federal income taxes.
- FedEx’s effective federal income tax rate was 4.2 percent in 2021, with $4.7 billion in U.S. earnings and only $199 million in federal income taxes.
- MetLife’s effective federal income tax rate was 1.3 percent in 2021, with $4.8 billion in U.S. earnings and only $62 billion in federal income taxes.
- Merck’s effective federal income tax rate was 4 percent in 2021, with $1.9 billion in U.S. earnings and only $74 million in federal income taxes.
- Nike’s effective federal income tax rate was 5.9 percent in 2021, with $5.6 billion in U.S. earnings and only $328 million in federal income taxes.
- Coca-Cola’s effective federal income tax was 7.1 percent in 2021, with $3.4 billion in U.S. earnings and only $243 million in federal income taxes.
While this analysis was limited to companies on the Fortune 100 list, there are many other large, notable companies that paid no federal income taxes in 2021, underscoring that the problem extends well beyond the Fortune 100. For instance, Salesforce paid no federal income taxes in 2021, despite $2.7 billion in U.S. earnings; Duke Energy paid no federal income taxes in 2021, despite $3.7 billion in U.S. earnings; and Kinder Morgan paid no federal income taxes in 2021, despite $2.2 billion in U.S. earnings. Netflix, just outside the Fortune 100, paid a measly 1.1 percent on $5.3 billion of U.S. earnings.
The same year these companies managed to avoid paying their fair share of taxes, corporations as a whole had their best profits in years. According to data from the financial data company FactSet, the four most profitable quarters—since FactSet began collecting data in 2008—for corporations on the S&P 500 happened in 2021. And the average net profit margin for S&P 500 companies averaged across those quarters is 12.79 percent, according to a Yahoo News analysis of the FactSet data.
Moreover, the Institute for Taxation and Economic Policy (ITEP) conducted a comprehensive analysis of federal taxes and company profits for a larger set of companies last year, concluding that former President Donald Trump’s TCJA allowed many companies to pay $0 in taxes. The analysis found that:
[W]ith three years of data published on the effective tax rates paid by publicly traded companies, it is clear that the TCJA has not meaningfully curtailed corporate tax avoidance and may even be encouraging it.
ITEP found that for 2020, 55 profitable companies in the Fortune 500 or S&P 500 paid no federal taxes; and 26 paid nothing over the three-year period from 2018 to 2020, showing that it was not just a one-year aberration.
Conclusion
This status quo can be changed. Polls show that raising taxes on corporations is among the most popular elements of President Biden’s economic agenda. Policymakers must act now to ensure that large, profitable corporations pay their fair share. President Biden has proposed—and the U.S. House of Representatives has already passed—a 15 percent minimum corporate tax, which is in the House-passed fiscal year 2022 budget reconciliation bill, along with other measures to stop corporate tax avoidance. Most significantly, the bill closes offshore loopholes to prevent companies from shifting their profits to tax haven countries to avoid U.S. tax.
Ending corporate giveaways in the tax code and closing loopholes would ensure that large corporations start paying their fair share, allowing the country to raise revenue needed to invest in American families and grow a healthy economy that works for all.
Methodology
The income tax expense and pretax U.S. earnings data presented in this column come directly from the annual 10-K reports that the companies filed with the U.S. Securities and Exchange Commission (SEC) for fiscal years that ended during 2021. Effective tax rates were calculated by dividing the current U.S. federal income tax expense that companies reported to the SEC by their U.S earnings before federal income tax—that is, U.S. pretax earnings less state and local current income tax expense.
As ITEP has explained, U.S. current federal income tax expense is companies’ best estimate of the income taxes they will pay to the federal government for the year. Their actual corporate income tax returns are not made publicly available.
The U.S. effective tax rates listed here differ from the “effective tax rate” measure that companies self-report for two fundamental reasons: Their effective tax rate measure includes foreign taxes and deferred taxes—taxes they will not pay this year.
This analysis generally follows the methodology used by ITEP, except that ITEP typically makes certain additional adjustments and refinements, including deducting “excess benefits” from stock options from current income tax expense. This analysis did not make such adjustments.
Some companies that appeared to pay very low effective rates are not included on this list for data reasons—for example, if their financial statements did not isolate their U.S. profits or if they had significant “noncontrolling interests” in other companies. Some companies on this list have noncontrolling interests that are essentially insignificant for their effective tax rate. Verizon reported that noncontrolling interests lowered its self-reported effective tax rate by 0.4 percentage points.
ExxonMobil’s 10-K did not distinguish the current and deferred portions of its state and local tax expense nor the small amount of U.S. tax it reported on non-U.S. operations; the calculation above treats both as current income tax expense, but neither have a significant impact on the company’s U.S. federal income tax expense.
*Authors’ note: Corporations are presented in order of size, per the Fortune 100 list.