Study: U.S. Tax Code Favors Large Companies

A new report released by two tax-policy advocacy groups suggests that some of the most profitable U.S. companies are paying far less corporate taxes than either their peers or much smaller companies.

The report, “Corporate Taxpayers and Corporate Tax Dodgers, 2008-2010,” found that the 280 companies studied paid an effective tax rate of 18.5 percent over the three-period considered. That was less than half the statutory rate of 35 percent. What’s more, 78 of the companies had at least one year in which they paid no federal income tax at all, while 30 received what the report’s authors call a “negative income tax rate.”

“Our study provides proof that too many corporations are already coddled by our tax system,” said Robert McIntyre, director at Citizens for Tax Justice and the lead author of the report.

There are a couple of data points that should especially interest small-business owners.

First, the report found that online retailer paid just 7.9 percent on its $1.8 billion in profits from 2008-2010. That puts a whole new perspective on the company’s ongoing fight against state sales for online transactions in states where it supports a warehouse facility.

Anyone in the delivery or logistics sector will be interested to hear that the report shows FedEx paid 0.9 percent over the three-year period, compared with 24.1 percent paid by UPS.

Generally speaking, the report found that the most federal corporate tax subsidies went to support companies in the financial services, utilities, telecommunications, and oil/gas industries. A number of large defense contractors also received substantial breaks, according to the report.

Clearly the group sponsoring the study has a political agenda, although this is the tenth publication on corporate taxes that they have published — a record that lends credibility to their findings.

It would be naive to suggest that all corporate tax incentives are a bad thing or that they are all focused on large companies. Short-term programs can and should be considered all the time, especially in times of economic crisis. The payroll tax breaks for smaller employers currently being advocated by the Obama administration are just one example that someone is still paying attention, even if some doubt how effective those breaks will be.

It is when tax incentives or shelters become systemic, and when the companies that benefit take them for granted, that we should all sit up and take notice.

This report is one that every small-business owner should make sure their Congressional representatives read as Washington policymakers consider fundamental changes to the federal tax code.

Heather Clancy is an award-winning business journalist with a passion for small businesses, green technology and corporate sustainability issues. Her articles have appeared in Entrepreneur, Fortune Small Business, The International Herald Tribune and The New York Times. Follow her on Twitter.