Wish it could be you? No federal income tax
It’s little wonder why many U.S. taxpayers are cynical about our federal income tax system when we learn that many of the nation’s top profit-making corporations pay zero tax.
According to the Institute on Taxation and Economic Policy, 60 Fortune 500 companies, including three local utilities, avoided paying all federal income tax in 2018.
As preposterous as this may seem, many of them also received rebates. PPL, the local utility which serves customers in the five-county Times News region, received $19 million in rebates from Uncle Sam after reporting profits of $1.1 billion.
A number of major utilities are on the list of 60, including FirstEnergy Corp., parent company of local utility Met-Ed, which showed profits of $1.5 billion and $16 million in tax rebates, and local gas provider UGI, which showed a profit of $550 million and received a $3 million rebate.
Utility representatives said the tax plan is intended to encourage infrastructure investment. In the case of PPL and FirstEnergy, it also means improving the power grid, representatives said.
The newest figures mean that the Republican-sponsored Tax Cuts and Jobs Plan that went into effect near the end of 2017 was a spectacular boon to big corporations. Between 2008 and 2015, 18 companies avoided paying zero tax; under the new tax-cut plan, the number of companies paying no federal taxes ballooned by 233%.
When we think of tax reform, we hope that regulators are looking at ways to plug loopholes to make everyone pay his, her or its fair share, but the 2017 tax package not only perpetuated these breaks for big companies, it widened some loopholes.
On the other hand, for many individual taxpayers, they saw minimal gains, and in some high tax states, such as New Jersey, New York and California, some wound up paying more because several prized deductions such as real estate taxes were limited.
Some of the biggest names in corporate America paid zero taxes and had rebates, too. Among them was amazon.com, which has a fulfillment center in Hazleton. The company received a $129 million rebate despite posting profits of $11.2 billion in 2018.
Adding up the tax breaks enjoyed by these 60 companies, we see that that made a total of $79 billion in pre-tax profits in 2018, paid no taxes and received $4.3 billion in rebates.
Tax experts say they do not know for sure what these publicly traded companies do to take advantage of these favored tax strategies. They do not lay out their strategies in their annual reports to shareholders, and, of course, their tax returns are not public.
On top of that, it has not been a priority of the Securities and Exchange Commission to compel more detailed information. The commission merely requires the publishing of annual reports.
It would be up to Congress or the SEC to mandate a higher standard of public disclosure to give us the kind of specifics we need to unravel the mystery of how companies avoid tax obligations.
The new tax plan expanded depreciation benefits. Other tax breaks include stock options, fossil fuel tax subsidies, alternative energy tax subsidies and tax credits.
Understand that these companies are not doing anything illegal. Through their legal and accounting teams, they are using the system to their benefit.
I don’t know how you feel, but there is something wrong with our system that allows highly profitable companies to continue to avoid all federal income taxes while those of us with less means must pay our obligations.
By Bruce Frassinelli | email@example.com