Dive Brief:
- Standard & Poor’s 100 companies paid tax at an average effective rate of 20% last year when accounting for federal, state and international levies, a 1 percentage point increase compared with 2019, WalletHub said in a report.
- Oracle, Adobe, Microsoft and most other large technology companies paid tax abroad in 2020 at a rate that was more than 3 percentage points lower than the U.S. rate, continuing a trend dating to 2013, WalletHub said.
- Nine S&P 100 companies in 2020 enjoyed an effective overall tax rate that was negative and gained a net tax benefit, WalletHub said. The companies included Wells Fargo, Salesforce, AbbVie, Duke Energy, Adobe, Broadcom, International Business Machines, Medtronic and General Electric.
Dive Insight:
House Democrats on Monday proposed scuttling a Trump administration tax cut by raising the top corporate tax rate to 26.5% from 21%. Their plan would fund legislation to combat climate change and expand federal programs in healthcare, education, child care and other social services.
“Rolling back job-creating tax reforms will slam the brakes on hiring and wage increases,” U.S. Chamber of Commerce Executive Vice President Neil Bradley said in a statement. “Every CEO and business leader is concerned about this proposal,” he said, calling it “an existential threat to America’s fragile economic recovery and future prosperity.”
The House tax package is less ambitious than one proposed by President Biden, who wants to raise the corporate tax rate to 28%, create a 15% minimum tax for companies with income exceeding $2 billion and set a 21% levy on offshore profits.
Effective tax rates last year among the S&P 100 companies varied widely. NVIDIA paid at a 1.8% rate — far lower than Gilead Sciences (94.7%), Booking Holdings (89.6%) and Kraft Heinz (65%), WalletHub said.
Low international tax rates helped some companies achieve an effective overall tax levy last year that was negative, according to WalletHub. IBM paid the lowest international tax rate (-37%), which helped reduce its overall tax rate to -18.6% last year from 7.19% in 2019.
The Biden administration aims to curtail billions of dollars in tax avoidance by ending what it calls “international tax competition.” Treasury Secretary Janet Yellen in June secured agreement from 130 countries for a minimum global corporate tax of 15%.
Large U.S. companies report 60% of foreign profits in seven low tax jurisdictions that make up less than 4% of global gross domestic product, according to the White House.
WalletHub based its study on annual reports published by S&P 100 companies from 2012 until 2020. It determined effective tax rates by identifying revenues, tax payments and deferral amounts at the federal, state and international levels.
