As a seasoned tax attorney, I’ve seen my fair share of tax evasion cases. However, the scale of tax evasion by some of the largest and most profitable corporations in the U.S. is truly staggering. According to a recent article, at least 55 U.S. companies have paid an effective tax rate of less than 5% since 2017, thanks to the tax cuts enacted under then-President Donald Trump.
The $1.9 trillion Tax Cuts and Jobs Act (TCJA) of 2017, championed by the former president, slashed the federal corporate income tax rate from 35% to 21%. Additional loopholes benefitted major companies, according to the Institute on Taxation and Economic Policy (ITEP). The institute examined 342 of the most profitable companies in the U.S. and how much they paid in taxes between 2018 and 2022, the first five years after the bill became law.
When taken together, these companies paid an average effective tax rate of just 14.1%. For the $3.99 trillion they raked in, they paid just $562.29 billion in federal taxes. Eighty-seven firms paid effective tax rates in the single digits or less; 55 of those companies had effective tax rates of less than 5%. This group includes some of the heaviest hitters: Netflix, Nike, General Motors, AT&T, Salesforce, Bank of America, and Citigroup.
For comparison, the average single American worker faced a net average tax rate of 24.8% in 2022, according to the Organization for Economic Co-operation and Development. This stark contrast raises serious questions about the fairness of our tax system and the ethical implications of such tax evasion.
The future of the Trump tax cuts is on the line in 2024. President Joe Biden has supported increasing the corporate tax rate to 28% and raising taxes on the wealthy to lower the national deficit. Congressional Republicans, who currently control the U.S. House, would rather extend the tax cuts or make them permanent. The legislation’s tax breaks for individuals are set to expire at the end of 2025.
As we move forward, it’s crucial to remember the importance of responsible financial citizenship. Tax evasion, whether by individuals or corporations, has serious consequences for our communities and our nation. It’s time to shed light on these practices and promote a fairer, more equitable tax system.