New tax code leaves workers paying higher tax rate than corporations

click to enlarge General Motors headquarters. - Linda Parton /
Linda Parton /
General Motors headquarters.

A new report says 91 of the nation's largest corporations didn't pay any federal income taxes in 2018, the first year of the Trump administration's new tax law. The study, by the Institute on Taxation and Economic Policy, says even though the corporate tax rate was lowered to 21%, legal loopholes allowed the corporations surveyed to pay, on average, just over 11% in taxes.

Report co-author Matthew Gardner, senior fellow at the institute, points out this kind of corporate tax avoidance is entirely within the law.

"There is no implication that any of this is illegal. By all accounts, these companies are simply using the legal tax breaks that they lobbied Congress to give them," Gardner says.

The companies that paid zero taxes include Amazon, Netflix, and DowDuPont of Midland, Michigan. Detroit-based General Motors also didn't contribute any taxes on more than $4 billion in profits. Supporters of the new Tax Code have argued that lowering corporate rates would lead to increased investments and higher wages.

But Gardner says most workers' wages have remained stagnant, and many corporations used the extra money saved on taxes to buy back stock instead of investing in their companies. He calls the report's findings disturbing, especially for middle-class workers who now know they pay a much higher tax rate than many wealthy corporations.

"There is a problem of democratic distrust right now," he says. "People do not trust their government, they don't trust elected officials. And it's precisely this sort of finding that reinforces that distrust."

The authors suggest Congress should reinstate a strong corporate Alternative Minimum Tax to act as a backstop to ensure all profitable corporations pay a meaningful corporate income-tax bill each year.

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