When the White House announced President Joe Biden’s American Jobs Plan, the $2.3 trillion infrastructure plan it paired it with a tax plan it promised would “make sure corporations pay their fair share in taxes.” Administration officials and the president himself pointed to studies that showed how many Fortune 500 companies, the largest in the country by revenue, paid nothing in federal income taxes.
“A new, independent study put out last week found that at least 55 of our largest corporations use the various loopholes to pay zero federal tax, income tax, in 2020,” Biden said last week in a speech promoting his plan. “It’s just not fair. It’s not fair to the rest of the American taxpayers. We’re going to try to put an end to this.”
But The Washington Post’s Jeff Stein reports that it’s not at all clear that Biden’s tax proposals would eliminate the ability of large corporations to pay nothing in federal income taxes.
“That is because Biden’s plan would still allow virtually all corporations to use federal tax credits and deductions to reduce their existing tax obligations — one key reason some large firms pay nothing,” Stein writes. “Biden’s $2 trillion jobs and infrastructure plan includes a significant expansion in these kinds of credits, such as for clean energy investments, that corporations use to zero out what they owe the Internal Revenue Service. Additionally, the Biden administration dramatically narrowed its proposal to ensure large firms pay at least some federal taxes, muting its impact by having it only apply to a sliver of firms.”
Steve Rosenthal, a tax expert at the Tax Policy Center, a nonpartisan think tank, told the Post that Biden’s plan does not address key elements of the tax code that enable corporations to pay no federal income taxes, including the ability to deduct capital expenses, executive compensation and losses from prior years. And Biden’s proposal to ensure that large businesses can’t use accounting maneuvers avoid paying taxes applies only to companies with more than $2 billion in annual profit — a much higher threshold than the $100 million Biden had proposed during the presidential campaign. That threshold means that the provision would not apply to 50 of the 55 corporations that did not pay federal income taxes in 2020, Stein says.
White House officials did not deny that some corporations could still pay no federal income taxes, Stein reports, but they said that the number doing so would be significantly reduced under the president’s plan and they emphasized that big businesses overall would pay far more — some $2.5 trillion over 15 years — than under current law.
Some tax experts also suggest that the examples of corporations paying no federal taxes may matter mostly because they’re emblematic of broader issues with the corporate tax code. “One reason the public gets so mad about these stories [about large firms paying nothing] is because they know it’s standing in for an underlying reality that companies are getting away with a lot,” Dan Shaviro, a tax expert at New York University, told the Post. “If there was still the occasional company that did it, but the public realized corporations were paying a lot more, those stories would be less significant.”
