Despite that, Amazon’s profits surged to $20 billion last year as people shifted to shopping online. But the company paid just 9.4 percent of its profits in federal corporate income taxes, after paying zero in 2018 and about 1 percent in 2019. Its total effective federal corporate income tax rate over three years was just 4.3 percent on $44.7 billion in profits. That’s a far cry from the statutory rate of 21 percent.
In 2020, Netflix’s profits surged to $2.8 billion because people went out less and instead watched more TV at home. Yet the company paid less than 1% of those profits in federal corporate income taxes, after paying nothing in 2018 and about 1 percent in 2019. Over those three years, Netflix paid a total effective rate of 0.4 percent on $5.3 billion in profits. Again, not at all close to the 21 percent statutory rate.
And late last week we learned that Zoom, the video conferencing platform that has become ubiquitous for meetings, saw its profits spike by 4,000 percent last year. But the company paid zero federal corporate income tax for 2020.
Zoom, Amazon and Netflix are not alone. The pandemic has been hard on many businesses large and small, and many reported losses last year. But some with profits–indeed even some with record profits because of the pandemic–avoided paying corporate income tax on those profits. So far, my colleagues have found more than 50 S&P 500 corporations that reported profits but paid no federal corporate income tax last year–a year when our lives depended on public resources for testing, research and vaccine distribution.
Here are some truths about corporate tax avoidance.
- First, lawmakers could address this but have chosen not to. We were all quite aware of the corporate tax avoidance crisis when Congress drafted a major overhaul of the tax code, signed into law by former President Trump in 2017. The figures above are the result of that new law during its first three years.
- Second, tax avoidance is not due to the current economic crisis. The corporate income tax is a tax on corporate profits. It doesn’t affect companies that aren’t profiting. Shutting down special breaks and loopholes would not hurt businesses laid low by the pandemic.
- Third, corporate tax dodging hurts ordinary Americans by reducing resources for health care, road repair and other essentials. Trump administration officials claimed their corporate breaks would boost the economy. In fact, GDP growth in the law’s first two years was 2.9 percent and 2.2 percent, comparable or well below 2015 levels. Proponents of the breaks also argued the benefits would be passed onto workers, boosting salaries by $4,000 to $9,000 This never happened and the Congressional Research Service found that instead $1 trillion went to share buybacks, which enrich mostly wealthy stockholders.