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Righteous indignation can be very effective, but sometimes it’s not all that righteous. Such is the case with recent op-eds penned by the CEOs of General Electric and Verizon, each of whom argue that contrary to the stump statements of presidential candidates, their companies do pay their “fair share” of taxes.
Verizon CEO Lowell McAdam claims, in a recent op-ed and fact sheet, that it’s “just plain wrong” to assert that Verizon doesn’t pay its fair share of taxes and that the company paid a 35 percent tax rate in 2015. While McAdam doesn’t elaborate, he likely is tallying the company’s global taxes to make this claim. However, the annual taxes that the company pays to the federal government in recent years has been a lot lower than 35 percent and, thus, McAdam’s indignation is rather artificial.
In fact, over the past 15 years, Verizon has paid a federal tax rate averaging just 12.4 percent on $121 billion in U.S. profits, meaning that the company has found a way to shelter about two-thirds of its U.S. profits from federal taxes over this period. In five of the last 15 years, the company paid zero in federal taxes. While there is no indication that this spectacular feat of tax avoidance is anything but legal (the company’s consistently low tax rates are most likely due to overly generous accelerated depreciation tax provisions that Congress has expanded over the last decade), few Americans would describe the company avoiding tax on $78 billion of profits as “fair”.
General Electric CEO Jeffrey Immelt takes a similar position in a recent op-ed. Immelt defends the company’s tax record simply by noting that the company “pay[s] billion in taxes.” This is true, but also meaningless for a company with earnings as gigantic as GE’s. In fact, over the past 10 years, GE paid an effective federal income tax rate of -1.6 percent on $58 billion in profits. Over 15 years, the company’s federal income tax rate was just 5.2 percent.
The company’s tax-avoiding ways extend to the state level, too. Over the past five years, the company paid an effective state income tax rate of just 1.6 percent. Immelt likely focuses on the dollar amount and not the company’s tax rate because there is simply no way of fudging the numbers to make the company appear to be paying income taxes at anything but a ridiculously low rate.
Congress Could End This
There is certainly room for righteous indignation in the ongoing debate over how to reform our corporate income tax. But the real source of such indignation should be the working families and small businesses that don’t have access to the congressionally sanctioned tax breaks used by Verizon, General Electric and other large multinational corporations.