Tax Cut! Yardeni Research Calculates Effective Corporate Tax Rate Already Fallen To 13%

In March 2017, The Institution on Taxation and Economic Policy (ITEP) released its latest report examining the corporate tax filings for Fortune 500 companies. It looked at 258 of the companies which had been "consistently profitable" from 2008 to 2015. The report concluded that these companies were collectively paying far less than the statutory 35% federal corporate tax rate – in fact the average effective tax rate was 21.2%. According to the ITEP report.

Many profitable corporations are finding ways to zero out their corporate taxes.  Of the 258 profitable Fortune 500 companies in our sample:

  • 18 paid ZERO in taxes over the full eight-year period.
  • 100 paid zero—or less—in at least one profitable year during the eight-year period, 58 of those companies had multiple zero-tax years.
  • 24 companies zeroed out their taxes in at least four of the eight years. 
  • 48 companies paid a rate between 0 and 10 percent over eight years.

In general, it found that utility, oil, gas and pipeline companies tend to pay low tax rates. Only about a quarter of the companies paid a tax rate of at least 30% and about 60% of those companies were in two sectors, retail and health care.
The report found that the 258 corporations enjoyed tax breaks of $526 billion during the eight years 2008-15. More than half of this total, $286 billion, went to just 25 companies.

If you thought that was bad, you’re in for a shock because analysis by Yardeni Research suggests that the situation could already be even worse…and Congress hasn’t even passed the tax reform bill. According to CNBC.

U.S. companies on balance already are paying well below the 20 percent tax level targeted in the Republican reform plan, according to an analysis by Yardeni Research. In fact, the typical effective tax rate - the amount paid minus deductions - could be as low as 13 percent over the past years, Yardeni concluded when looking at a cleaner number of how much the government is really collecting. That's well below other estimates that sought to clarify the impact of the tax reform proposal that would take the current nominal rate from 35 percent to 20 percent. Multiple firms have concluded the benefits will tilt to specific sectors and provide a limited aggregate windfall.

Delving in to the data, Yardeni uses the example of the Q3 2017 GDP release from the Bureau of Economic Analysis. The data shows that corporations paid $472.9 billion in taxes during the past four quarter on pre-tax profits of $2281.4 billion. This implied an effective tax rate of 20.7%, which was obviously very close to the effective tax rate calculated by ITEP.

However, Yardeni wasn’t done. Noting that corporate tax revenues collected by the IRS are consistently less than corporate taxes included in the GDP measure of corporate profits. Using the Treasury’s data of corporate tax collected in the four quarters through Q3 2017 - $297 billion and 37% lower than the $472.9 billion in the GDP measure – Yardeni concluded.

The shocking result is that the effective corporate tax rate based on actual tax collections was only 13.0% during Q3, and has been mostly well below 20.0% since the start of the previous decade. What gives? I’m not sure, but I am inclined to follow the money, which tends to support the story told by the IRS data. If so, then Congress may be about to cut a tax that doesn’t need cutting. Or else, the congressional plan is actually reform aiming to stop US companies from using overseas tax dodges by giving them a lower statutory rate at home. We may not be able to see the devil in the details of the bill until it is actually enacted.

Here are Yardeni’s ugly findings in chart form…

…although, as CNBC reports him saying.

"The bottom line is that getting to the bottom line when it comes to matters of taxation is a very taxing exercise"


YUNOSELL Wed, 12/13/2017 - 17:30 Permalink

They want to repatriate that offshore money really bad!!!!Typical bait and switch -- Offer them tax cuts now, and then when the money's back tax it all to kingdom come

Antifaschistische ejmoosa Wed, 12/13/2017 - 17:58 Permalink

"effective corporate tax rate"I have a novel revelation for them...the only thing that really pays taxes, is a human being.   The false notion that we can get "corporations" to pay a tax is just smoke and mirrors.   The notion that only rich people own corporations and therefore corporate taxes are an implicit tax on higher income earners is bogus.  Because corporate costs and net profitabiliy are immediately translated into wages for people that do real work. So corporate "taxes" are really just another insidious tax on the; owners (through lower gains), employees (through lower wages) and consumers (through higher prices)  

In reply to by ejmoosa

Majestic12 Antifaschistische Wed, 12/13/2017 - 18:05 Permalink

"The false notion that we can get "corporations" to pay a tax"

It is a new-fangled invention...called pass a law.

"enforce" a "free-market"...insanity, or realistic?

The answer is now always "monetary" incentive...

If the laws for violating had teeth, and corporate assholes really faced "real" prison (not Fed country clubs)...that would be an effective "incentive" to follow the law.

Moreover, we would see monopoly fall away with poverty and entrepreneurship would explode.

In reply to by Antifaschistische

andletgo johngaltfla Wed, 12/13/2017 - 19:14 Permalink

No you don't, customers may or may not tolerate a price of cost plus margin plus top-up for effective tax rate, you sell at what the market allows you to sell at, price depends on many factors, market, your strategy to maximize profit or revenue or market share or capacity or whatever and you then pay tax on your realized profit, not the other way around

In reply to by johngaltfla

Tapeworm johngaltfla Wed, 12/13/2017 - 19:38 Permalink

As an "S"corp I pay well over 30% and with my tariffs on "income" it goes well past 50%. There are mant special fees upon me that never show up in the official stats. The official stats on taxation do not remotely account for the losses that I take.  Besides, I am one of the truly old bastards that machine metal to make ultra prciscion molds to make the junk that the taxtakers disdain, unless it is to feather their cuckoo nests. I don't say, "fuck" and other ill chosen words, but I will say that I am to be screwed over again. Why would a dope that paid off an 107,000 mortgage fifteen years early want to get special tax treatment for a 750,000 mortgage?

In reply to by johngaltfla

AntiMatter Wed, 12/13/2017 - 17:33 Permalink

FUCK YOU TRUMP.! Taxes are illegal and unconstitutional. Taxes on ones labor are a fraud and used as a sledgehammer to control the 99%. Its  financial fascism on a grant scale to keep us in the poor house and in fear, dumb ass folks going along being scammed by their fucking govt instead of protesting kicking and screaming en mass. Show me the fucking (tax) law, it does NOT exist asshole.! Abolish the IRS>

Harry Vederchi Wed, 12/13/2017 - 17:33 Permalink

The right corporate tax rate is zero.Corporate tax is a lie. People pay taxes, not companies. Customers, shareholders, employees, suppliers...Corporate tax complicates business and hurts productivity.The lie is not even elaborate. It's obvious. Greed over reason. Voters believe in a free lunch and politicians lure them.Let us face the truth and pay our government with our income and sales taxes. Suppress corporate tax.

LetThemEatRand DiotheDog Wed, 12/13/2017 - 17:49 Permalink

Corporations only assert personhood when it suits them, for example when they want to give unlimited amounts of money to bribe politicians, to make sure that the "two" parties select only their approved candidates, and to be charged with crimes in lieu of the individuals within the corporations who commited the crimes.  But when it comes to taxes, they are not people.

In reply to by DiotheDog

NiggaPleeze LetThemEatRand Wed, 12/13/2017 - 21:28 Permalink

Again, the exact same argument the corporate lackeys use can be applied to all income tax (and all taxes in general). The cost of hiring an employee is increased by the tax rate. If you are happy working for $100K/year now at a 40% tax rate, you would also be happy working for $60K/year now with no tax rate. What you get is the exact same.

The only tax to which this does not apply is the inheritance tax, but that of course, to protect the poor hard-working billionaires and oligarchs, cannot be taxed at all.

All taxes (except inheritance) in the end are paid by everyone. It's taking a slice of your labor. Why should corporations have less tax obligations than a worker? Makes no sense at all.

In reply to by LetThemEatRand

andletgo Harry Vederchi Wed, 12/13/2017 - 18:05 Permalink

This pearl of wisdom apparently relies on the assumption that corporations would pass savings on to consumers if effective corporate tax rate was zero, which is naive at best. As we have seen with the outsourcing over the last 25 years, savings translate to increased margins, profits, stock market valuations and executive pay, not reduced consumer prices or improved product or service quality. Prices are determined by market factors and will remain the same until market factors dictate they should be changed and any margin variations would affect profits

In reply to by Harry Vederchi

Curiously_Crazy andletgo Wed, 12/13/2017 - 20:01 Permalink

It also follows for employment.The economy around here is down the crapper, and we've already had two corporate tax cuts with more to come. My employer at the time was overjoyed saying how it would mean he could "keep on more staff with the savings" I replied that's all good and well, but you wont, because your not a charity and that if the demand isn't there it isn't there. I was laid off some months afterwards.

In reply to by andletgo

tangent Harry Vederchi Wed, 12/13/2017 - 19:10 Permalink

THIS IS PROVEN TRUE. Corporate profits do NOT... NOT... NOT... vary with the corporate tax rate over the long term. The idea corporations pay taxes is absurd. Consumers of their products pay this tax, the corporation as you point out merely collect them for their respective governments. Democrats just love shoveling down this bullshit down their throats. They hate them self. They punish them self to think they are punishing the rich.

In reply to by Harry Vederchi

Tapeworm Harry Vederchi Wed, 12/13/2017 - 19:48 Permalink

"Corporate tax is a lie" What about the companies that leech enormous amounts from something as simple as resource useage to clogging the courts? These bastards must pay for their privileges and leave people such as I alone. As a corporation holder I have never gained a peny from any goomint racket. My immense taxes far outweigh whatever favor I have ever gotten from the State.

In reply to by Harry Vederchi

rp2016 Wed, 12/13/2017 - 17:45 Permalink

this is not the time to give stimulus. both sides can't keep looting .... President Trump, you want to do infrastructure project .. do it .. tax the investment income or gains.. realized or unrealized .. you can't raise money.. bring a truck and run away with it ... you are looking so stupid .. like a 4th world country... not many can relate to it .. coz not many have seen a 4th world country..

stljoe Wed, 12/13/2017 - 17:53 Permalink

The most important bit of that report is this Many multinational companies face higher corporate tax rates abroad than in the United States. Of 107 companies in our report that engaged in substantial international activities (constituting more than 10 percent of their worldwide income), 62 paid higher foreign tax rates on their foreign income than the tax rate they paid to the U.S. treasury on their domestic income. For these 62 companies, the average foreign tax rate was 25.8 and the average federal tax rate was 18.3 The reason they aren't paying domestic taxes is that our rates are in fact confiscatory so they locate operations overseas and pay foreign taxes instead of domestic corporate taxes. If you don't believe it is a problem that our exorbitant tax rates leads to pushing jobs and taxes overseas than you are too fucking stupid to continue wasting oxygen.

gouyou Wed, 12/13/2017 - 18:01 Permalink

And what everybody is ignoring is that the cut is important for small businesses, not the large corporations. The large corporations have plenty of tax attorney to make sure they are paying the minimum, will the situation change for them? Maybe, but that isn't important, what is important is that the small guys benefit from a simple tax cut. The tax cut will have a significant impact on the folks producing 46% of the GDP.

Tapeworm gouyou Wed, 12/13/2017 - 20:01 Permalink

 Not once in the past forty years has one of these targeted tax programs have ever reduced my burden. The best thing ever was the writeoff on capital equipment that was able to lenghten the destuction of the middle class industrial employee. I actually care about my employees but the constant assault of the social justice warriors leaves me cold. I have more than strongly hinted that they should buy me out and continue on their own. No takers. In fact, those that are around for three years get 12%-15% of their gross income for their SEP/IRA. All but a few have used it for cruises. I am sure that they view me as a thief of their natural capital.

In reply to by gouyou

Yukon6400 Wed, 12/13/2017 - 18:03 Permalink

I say the report is deceptive. It does not define what precisely the numerator and denominator were to compute their percentage. It also did not define "subsidies". It also sounds like progressive/statist trash.Are losses brought forward in an NOL considered a "subsidy"?Is worldwide income being compared to US taxes paid after a deduction for foreign taxes paid?The sparse two page report answers nothing and sways the uninformed. This political agenda organization - The Institute on Taxation and Economic Policy - needs to divulge it's data and calculations.

JailBanksters Wed, 12/13/2017 - 18:06 Permalink

Why Tax them all, when the Government can just Loan an unlimited amount of money into existance that never has to be paid back.Unless it's a scam to make it look like they are not just printing money willy nilly to infinity and beyond. 

Ricki13th Wed, 12/13/2017 - 18:22 Permalink

I thought companies in the US pay the highest tax in the world. Yet another big lie told to the people to justify giving them most of the tax cuts rather than small businesess and middle class Americans. Sad!

Yukon6400 Ricki13th Wed, 12/13/2017 - 18:36 Permalink

The report is deceptive. I would not believe any of the article above. The Institution on Taxation and Economic Policy is very pro-Government & high taxation and anti-wealth, anti-low taxes, anti-tax cuts, anti-corporation, and throughout their "blog" they rag on one political party exclusively. This is not an unbiased report.

In reply to by Ricki13th

davidhenry Wed, 12/13/2017 - 18:35 Permalink

As has been written already, corporations don't pay taxes ... they colllect them. What government they collect them for is the only real variable.

Tapeworm davidhenry Wed, 12/13/2017 - 20:21 Permalink

As has been written already, corporations don't pay taxes ... they colllect them. What government they collect them for is the only real variable. I have seen this spastic "argument" for forty years. If you think that the taxes are just passed on to customers then I have no hope for you. Taxes gut the entrepreneur, the employees, the capital base,, and anything that that coterie can be taxed upon. Your pimple faced kid view of economics reminds me of my old Ayn Rand enthusiasms. Just pass along any and all costs to the customer. Report to me later on how that goes.

In reply to by davidhenry

franklin23 Wed, 12/13/2017 - 21:29 Permalink

The corporate tax cut is more about equity than reductions and to produce lower marginal rates allowing money to remain or be brought back to US. 2/3rds of the benefit are to individuals and pass throughs.