Two years ago, President Donald Trump ushered in new tax rates that decidedly have helped big businesses.
The overall tax rate that S&P 100 companies pay is about 21 percent, which is more than 15 percentage points lower than it paid before Trump’s 2017 tax law.
Qualcomm, CVS Health, Cisco Systems, Oracle and AIG pay the highest corporate taxes while Pepsico, Abbvie, Berkshire Hathaway, NVIDIA and FedEX pay the lowest tax rates, according to a new report from D.C.-based personal finance website WalletHub.com.
“One of the largest changes in the plan was that the federal corporate income tax rate was permanently lowered from 35 percent to 21 percent,” WalletHub officials wrote in the report. “Republicans championed the tax plan as beneficial to business and consumers and Democrats claimed it would only increase the wealth of the already wealthy. That debate becomes even more relevant as the 2020 presidential election approaches, as the winner will have the power to sign future tax code adjustments into law.”
With businesses enjoying their tax cuts, WalletHub analyzed annual reports for the S&P 100 — the largest and most established companies on the stock market — in order to determine the federal, state and international tax rates they paid in 2018.
The report provides an in-depth analysis of the 2018 federal, state and international tax rates paid by the S&P 100 companies, the largest and most established businesses in the U.S.
Included in the main findings:
• S&P 100 companies pay roughly 7 percent lower rates on U.S. taxes than international taxes.
• Tech companies, including Facebook Inc, Apple Inc. and Cisco Systems Inc, are still paying more than 15 percent lower rates abroad, continuing the trend from 2013, 2014, 2015, 2016 and 2017.
• Five S&P 100 companies are actually paying a negative overall tax rate and are therefore due a discrete net tax benefit: PepsiCo Inc, AbbVie Inc, Berkshire Hathaway Inc, NVIDIA Corporation and FedEx Corp.
• Among the remaining companies that owe taxes, Netflix Inc, Exelon Corp, General Motors Co, Pfizer Inc. and Adobe Inc. pay the lowest rates.
• The average S&P 100 company pays a 35 percent lower tax rate than the top 1 percent of consumers.
When asked whether the U.S. was leaving money on the table with the current corporate tax structure, Wallet Hub expert Ernst Coupet, a finance professor at Chicago State University, said in a relatively closed economic world, as the U.S. has competed in before the 1970s, firms and markets were wholly contained within their borders.
“As a percentage of its total gross domestic product, the United States’ degree of openness has increased from 8.3 percent in 1950 to 30.4 percent in 2014,” Coupet said. “This 267 percent increase in gross trading has not only opened the U.S. market to consumers but to investors and firms as well. High tax rate policies that were implemented in the post-WWII era may not be conducive now.”
Coupet added that investors are concerned about after-tax cash flows, and given convergence in corporate tax policies across boundaries, there may not be much room beyond the rates before the 2017 tax policy to increase corporate tax rates in the USA and remain competitive.
“Corporate marginal tax rates can be marginally increased. However, the way consumers are taxed should be more efficient,” Coupet said. “Not all consumers are the same — so their reaction to income taxes are also not the same.”
To view the full report, go to wallethub.com.