Corporate Income Tax Study from 1996-1998

See which companies paid no taxes and which ones received rebates.
Stephen TaubOctober 20, 2000

If your company is making wads of money, you’re probably seeing more than a third of it go to Uncle Sam, right?

Probably not.

That’s the overall conclusion from the Institute on Taxation and Economic Policy, a tax watchdog research and education organization.

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ITEP’s report, released Thursday, is an exhaustive analysis of the U.S. profits and federal income taxes of 250 of the country’s largest and most profitable corporations over the 1996-98 period.

Keep in mind that big companies are supposed to shell out 35% of their profits in taxes. However, the 250 companies in ITEP’s survey paid only 20.1% in 1998. That was down from 22.9% in 1996, and far below the 26.5% that a similar group of large companies paid back in 1988, soon after the closing of the 1986 Tax Reform Act, which was supposed to eliminate the kinds of loopholes that led many companies to avoid paying a lot of taxes.

During the three-year period, pretax corporate profits climbed 23.5%. However, corporate income tax revenues rose just 7.7% from 1996- 1999.

A few companies did pay out 35%. But, only one industry—publishing—paid out over 30% (actually 31.6%) over the three-year period.

Here are some of the findings:

  • Forty-one companies actually paid less than zero in federal income taxes in at least one year from 1996 to 1998. During those years, the 41 companies reported a total of $25.8 billion in pretax U.S. profits. But rather than paying $9 billion in federal income taxes at the 35% rate, these companies received $3.2 billion in rebate checks from the U.S. Treasury. Just one company, Texaco, reported $3.4 billion in U.S. profits and $304 million in tax rebates over the three years.
  • In 1998, 24 companies received tax rebates. These companies reported U.S. profits before taxes in 1998 of $12 billion, yet received tax rebates totaling $1.3 billion. Among the companies receiving tax rebates in 1998: Texaco, Chevron, CSX, PepsiCo, Pfizer, J.P. Morgan, Goodyear, Enron, General Motors, Phillips Petroleum and Northrop Grumman.
  • One hundred and thirty-three of the 250 companies paid effective tax rates of less than half the 35% rate in at least one of the three years (and many did it more than once). In the years that these 133 corporations paid such low tax rates, they paid just 8.5% of their $209 billion in U.S. profits in federal income taxes.
  • Over the 1996-98 period, petroleum was the lowest-taxed industry in America, with an effective tax rate of only 12.3%. In 1998, the tax rate on the 12 big oil companies in the study fell to only 5.7%.

Click Here to see the entire study, including a company-by-company analysis of total profits and total taxes paid. .