A new report on corporate tax rates shows that the financial services industry pays way less than its fair share.
Citizens for Tax Justice and the Institute on Taxation and Economic Policy recently published a paper that examines the tax rates that 280 profitable Fortune 500 companies have paid over the last three years.
As plenty of Republicans have reminded you, the United States boasts a high corporate tax rate: 35%. What these politicians don’t tell you, but this report does, is that hardly anyone pays that much: the average effective tax rate among the 280 corporations over the last three years was 18.5%, a little more than half the official rate.
Corporate Taxes Were Higher Under Reagan
Between accounting dodges, deferrals, and government subsidies, corporations pay historically low corporate tax rates, especially as compared to GDP. Reagan reformed the tax code in 1986, closing loopholes, and brought corporate tax rates up to about 2% of GDP. Nowadays, it’s about half of that.
And while industrial machinery pays the lowest tax rate of any industry (-13.5%!), financial services place sixth, paying only 15.5% on average — less than half the official corporate tax rate.
Leading the pack is Wells Fargo, which paid an average federal income tax of negative 1.4% over the last few years. On $49.4 billion in profits over the last few years, Wells Fargo has paid negative $680 million dollars — taking more subsidies and tax breaks than they pay!
Indeed, Wells Fargo topped the list of all corporations by dollar amount in tax subsidies. Between 2008 and 2010, Wells Fargo received nearly $18 billion in tax subsidies!
Other Banks Benefitted Too
Close behind Wells Fargo was PNC Financial, which paid an effective rate of 1.4% over the last three years. On nearly $10 billion in profits, the bank paid only $144 million in taxes.
Other retail banks that proved successful at dodging Uncle Sam were BB&T (20.4%), Capital One (24.1%), US Bancorp (27.6%). JP Morgan Chase, by paying 30.1% looks like an upstanding corporate citizen.
For anyone curious what protesters at Occupy Wall Street are upset about, maybe this can provide some answers. Banks are turning handsome profits once again, and corporations have all the rights of ordinary citizens, but they don’t have to pay their fair share of taxes.