As corporate earnings season begins in earnest, the advocacy group Citizens for Tax Justice
has released a report detailing 15 Fortune 500 companies that don't pay any taxes.
The list includes CBS, General Electric, Interpublic Group, JetBlue Airways, Mattel, Owens Corning, PG&E, Pepco Holdings, Priceline.com, Prudential Financial, Qualcomm, Ryder System, Time Warner, Weyerhaeuser and Xerox.
As a whole, the 15 companies paid no federal income tax on $23 billion in profits in 2014, and they paid almost no federal income tax on $107 billion in profits during the past five years. All but two received federal tax rebates in 2014, and almost all paid exceedingly low rates over five years.
For example, CBS had $1.8 billion in U.S. profits last year, and received a federal income tax rebate of $235 million, while Mattel, which has paid zero federal income taxes for the past five years, received a tax rebate of $46 million in 2014.
"The scope of corporate tax avoidance spans a wide variety of economic sectors. Moreover, the tax breaks that have allowed these companies to be so successful in their tax avoidance are, by and large, perfectly legal, and often have been on the books for decades," the report states.
So what's the solution?
"A sensible starting point should be to critically assess the costs of each of these tax breaks and to take steps to ensure that profitable corporations pay their fair share of U.S. taxes," the study says.
"The next step is just as important. The revenues raised from eliminating corporate tax subsidies should not be given right back to corporations in the form of tax-rate reductions, as corporate lobbyists and their allies inside the Washington Beltway preposterously argue."
So where should this money go? "As the vast majority of Americans understand, these desperately needed revenues should be used to address our nation's fiscal problems and to make critically needed public investments in our nation's future," the report argues.
As for GE, its decision to dump most of its GE Capital unit will cost it some juicy tax breaks. "GE has long used the financial operations of GE Capital to hold down its overall tax rate, a strategy that has allowed the conglomerate to pay taxes at a lower rate than its peers," writes Wall Street Journal reporter Ted Mann
"The impact has been significant enough that GE discusses it in its securities filings and was deterred for a long time from seriously considering a spinoff."
But now GE reports that its effective tax rate could double to 20 percent or more going forward, putting the company in line with its competitors.
Interestingly enough, analysts aren't quite sure how GE keeps its taxes so low in the first place. "It's a bit of a black box," said Deane Dray, an analyst at RBC Capital Markets, tells Mann.
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