Despite getting the corporate tax rate cut from 35% to 21% in the 2017 tax cut package Republicans passed through Congress, 60 companies in the Fortune 500 managed to pay a negative tax rate despite making tens of billions in income.
That’s according to a new report from the Institute on Taxation and Economic Policy (ITEP), which analyzed the 10-K Securities and Exchange Commission filings these companies have to file as publicly traded companies. For tax year 2018, dozens of corporations not only managed to pay $0 in federal taxes despite their profitability, but they actually got a collective tax rebate of more than $4 billion.
Amazon alone was able to get its tax bill to zero despite pulling in $11 billion in income, according to ITEP. Their federal income tax rebate amounted to $129 million, meaning that U.S. taxpayers effectively subsidized Amazon to the tune of $129 million, as the company was able to use a multitude of legal loopholes — not just loopholes in the Trump tax cuts, but ones that already existed prior to the passage of the bill in late 2017.
Another one of the biggest offenders on ITEP’s list is online streaming platform Netflix. As Grit Post previously reported, Netflix was able to pay $0 in taxes in tax year 2018 despite making almost $900 million. Netflix also paid a negative federal income tax rate, and got more than $22 million in tax rebates due to its deft use of corporate tax loopholes.
Newspaper publisher Gannett is perhaps the most egregious user of tax loopholes in terms of its effective federal income tax rate. While Gannett certainly isn’t as profitable as major corporations like Amazon and General Motors, the company was still able to pay a tax rate of -164%. Even though Gannett made $7 million in income, the company got a tax rebate of $11 million. Gannett was one of the many media companies that laid off journalists in 2018, along with others like HuffPost, BuzzFeed, Mic, and Vice.
Some of the legal loopholes these companies used to avoid federal taxes include the accelerated depreciation loophole, in which companies get to write off the full cost of capital investments much faster than those investments actually depreciate. Notorious oil giant Halliburton was able to cut its tax bill by $320 million thanks to this loophole.
The executive stock compensation loophole is one of the more popular among executives. Company CEOs and other top bosses are able to purchase company stock for pennies on the dollar while the company writes off the full price of the stock. For example, Amazon CEO Jeff Bezos could buy one share of Amazon stock for $1.84, rather than the current share price of $1,845. Amazon could then write off each one of Bezos’ stock purchases for full market value. This essentially results in a drastic increase for Bezos’ net worth at the expense of the U.S. taxpayer.
In the meantime, U.S. taxpayers aren’t so lucky. This week, IRS data showed that tax refunds for everyday American workers are down by $6 billion in comparison to this time last year. This is largely due to the Republican tax cut legislation, which revised IRS withholding rules so that while many Americans may have had a few more dollars in each paycheck, they ended up owing federal taxes this year as opposed to getting a refund.
Carl Gibson is a politics contributor for Grit Post. His work has been published in The Guardian, The Washington Post, The Houston Chronicle, NPR, and Al Jazeera America, among others. Follow him on Twitter @crgibs or email him at carl at gritpost dot com.