This study examines the federal income taxes paid or not paid by 250 of America’s largest corporations in 1996, 1997 and 1998. This was a period of strong profit gains for American corporations. According to the U.S. Commerce Department, pretax corporate profits rose by a total of 23.5 percent over the three years.1 But federal corporate income tax revenues did not come close to keeping pace with growing profits— rising by only 7.7 percent from fiscal 1996 to fiscal 1999. This report takes a detailed look at why that happened.
Like similar studies by Citizens for Tax Justice and the Institute on Taxation and Economic Policy in the 1980s, this study analyzes the taxpaying habits of the nation’s most profitable companies, including some that paid substantial income taxes and others that paid little or nothing. The study compares federal corporate income taxes paid to reported pretax U.S. profits, and computes effective tax rates for the 250 companies. We report our results both for individual companies and by industry. We look at historical trends in corporate taxes, and provide specific information, where available, on how companies were able to lower their tax bills below the statutory 35 percent corporate tax rate.
The companies in the study are all from Fortune’s list of the nation’s largest corporations in 1998. All of the companies were profitable in each of the three years analyzed. The methodological appendix at the end of the study explains in more detail how the companies were chosen and how effective tax rates were calculated, and the 21 pages of notes on specific companies add more details.