New report: Corporate tax avoidance under the Tax Cuts and Jobs Act


July 29, 2021

A new report published this week by Matthew Gardner and Steve Wamhoff of the Institute on Taxation and Economic Policy (ITEP) found that 39 profitable corporations in the S&P 500 or Fortune 500 paid no federal income tax from 2018 through 2020, the first three years that the Tax Cuts and Jobs Act (TCJA) was in effect. The 39 corporations were profitable in each of those three years and, as a group, reported to shareholders that they had generated $122 billion in profits during that period.

A previous ITEP report, published in April, identified 55 corporations that were profitable in 2020 but did not pay federal income taxes for that year. The new report expands on that analysis, finding corporate tax avoidance under our current tax laws is a long-term problem that is not unique to any particular year.

“It’s clear that many companies are paying abysmally low effective tax rates even in the years when they pay something,” said Gardner, a senior fellow at ITEP and co-author of the report. “Looking at a single year tells us a lot, but when we look at corporate tax-paying habits over several years, we get a better sense of the scale of the problem. This makes a clear case for Congress to enact significant tax reforms.” 

Among the 39 corporations that avoided paying federal income taxes over three years, T-Mobile reported the largest profits. It reported $11.5 billion in profits over this time but had a federal income tax liability of negative $80 million, meaning the company received $80 million in tax refunds.

Besides the 39 companies that paid nothing over three years, an additional 73 profitable corporations paid less than half the statutory corporate income tax rate of 21 percent established under TCJA. As a group, these 73 corporations paid an effective federal income tax rate of just 5.3 percent during these three years, meaning they paid federal income taxes equal to just 5.3 percent of their profits.

Among the 73 corporations that paid less than half of the statutory rate are household names such as Amazon, Bank of America, Deere, Domino’s Pizza, Etsy, General Motors, Honeywell, Molson Coors, Motorola, Netflix, Nike, Verizon, Walt Disney, Whirlpool and Xerox—which all paid effective federal income tax rates in the single digits.

“President Biden’s proposals would not solve all the problems with our tax system but they could significantly reduce the worst corporate tax avoidance we have identified,” said Wamhoff, director of federal policy at ITEP and a co-author of the report. 

You can download a PDF of the new report here.

Tax avoidance