S&P 500’s Top Companies Paid a 2% Tax Rate on Revenue in 2018
We're not in the 90's anymore. Step up your game, TurboTax.
Amazon and other S&P 500 companies have a clever tax strategy: they don’t pay any.
To be exact, the top 50 companies by market capitalization in the S&P 500 paid taxes worth 2.1% of their revenue in 2018 with the exception of companies for which data was not readily available. Tax rates on individual companies are shown at the end, and all companies included were profitable for their executives and boards of directors.
In contrast, the average American worker pays income taxes worth 29.8% of their personal revenue [1]. That means that on a revenue-to-revenue basis, workers pay 14x more taxes than giant multinational corporations, which sounds absurd, so I had to do some digging.
Most financial analysts don’t report corporate tax rates on the basis of revenue, but why not? Revenue is harder to fudge and offers an apples-to-apples comparison with employees.
On top of the issue of not having revenue-based tax data, the income statements on Yahoo, Google, and everywhere else show the “tax expense,” which is usually a reasonable number that isn’t too far off from the statutory corporate tax rate of 21% on income. You would think this is how much money a company paid in corporate income taxes, but that would be too easy. It’s actually the number they get before subtracting tax subsidies and accounting for other loopholes. [2]
Armed with my Stanford MBA, I thought I’d take a shot at analyzing the hundreds of pages of SEC 10-K statements to find the true amount of taxes paid by these huge corporations. But considering that most of these companies found semi-legal ways to reduce their tax burdens to nearly zero, it’s not surprising that they’ve also found ways to hide their tax payment figures. Without much luck in my search, I had to find a real set of experts that analyzes these companies regularly.
The Institute on Taxation and Economic Policy, ITEP, was able to provide most but not all of the tax numbers I needed [3,4]. Even for them, some data points are just too obscure to find or even nonexistent in the public view. The following graph of tax rates on revenue is built from calculations using combined data from Yahoo Finance, MSN Money, and ITEP.
Companies range from those that receive welfare from the government, such as Amazon, Netflix, Nvidia, Chevron, and Honeywell, to Visa which paid a whopping 8% tax rate, coming the closest among its peers to the rate paid by people in the lowest personal federal income tax bracket. These workers earn less than $9,700 per year. Visa, the highest taxpayer of the bunch, earned $20,600,000,000 in revenue in 2018 and still managed to pay less taxes than someone who works full-time for $4.85/hr.
The U.S. stock market’s largest companies have been building a financial pyramid by moving stones from the supportive foundation to the pyramid’s peak. In an era when the Pentagon is missing over $30 trillion and the U.S. is in massive debt to foreign banks, I would expect more effort from corporate monopolies than 2% tax payments to keep the economy together. If the old economic order crumbles, so do they.
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Source Citations
1. Frankel M. “What's the Average American's Tax Rate?” The Motley Fool. https://www.fool.com/retirement/2017/03/04/whats-the-average-americans-tax-rate.aspx
2. Reilly PJ. “How Much Do Large Corporations Pay In Income Tax? Probably Less Than You Think”. Forbes. https://www.forbes.com/sites/peterjreilly/2016/11/03/how-much-do-large-corporations-pay-in-income-tax-probably-less-than-you-think/#5f85a8242399
3. Gardner M, Roque L, Wamhoff S. “Corporate Tax Avoidance in the First Year of the Trump Tax Law”. ITEP. https://itep.org/corporate-tax-avoidance-in-the-first-year-of-the-trump-tax-law/
4. Gardner M, Roque L, Wamhoff S. “Effective Federal Corporate Income Tax Rates on 379 Major Corporations, 2018”. ITEP. https://itep.org/wp-content/uploads/121619-ITEP-Corporate-Study_alphabetical.pdf
Photo by GotCredit via Flickr.
Exclusions
These companies were excluded from ITEP’s data due to a company’s failure to report accessible tax information or due to other reporting inadequacies: Broadcom, Accenture, Philip Morris, PayPal, Salesforce, Medtronic, Abbott Laboratories, Adobe, Boeing, Cisco Systems, Coca-Cola, Pfizer, UnitedHealth Group, Intel, Johnson & Johnson, Berkshire Hathaway, and Alphabet.