Working Americans, for the most part, pay federal income taxes. Salaried workers have a portion of their pay withheld for federal income taxes every pay period. Small business owners and independent contractors are required to submit payments to the federal government throughout the year based on their projected income. Except for workers with low incomes, these federal taxes amount to a significant percentage of workers' earnings. In 2020, for example, the average American family paid an effective tax rate of 13.6%.

But some massive corporations with billions in profits have a much different experience. 

On February 2, for example, General Electric (GE) reported about $7 billion in profits for 2023. GE CEO and Chairman H. Lawrence Culp Jr. was effusive. "In 2023, our teams delivered an excellent year, more than tripling earnings and generating almost 70 percent more free cash flow," Culp said in a statement. Culp noted the company was able to fatten the pockets of its shareholders by spending $7 billion on "dividends, buybacks, and retiring our preferred equity."

You might expect that, with such a profitable year, GE sent a giant check to the federal government. Instead, GE received a refund of $423 million. 

Data from Americans for Tax Fairness shows that GE is not an anomaly. Earlier this month, T-Mobile reported over $10.9 billion in profits in 2023 but paid just $42 million in federal income taxes, an effective tax rate of just 0.4%. Meanwhile, Tesla recorded $3.2 billion in domestic profits in 2023 but paid just $48 million in federal income taxes, an effective tax rate of 1.5%. 

The 2023 annual reports of public companies will be filed throughout the year. But in 2020, "55 of the largest corporations in America paid no federal corporate income taxes… despite enjoying substantial pretax profits in the United States," according to a report by the Institute on Taxation and Economic Policy (ITEP). Those 55 companies collectively brought in over $40 billion in pre-tax domestic profit. But instead of paying federal income taxes, they received $3.5 billion in rebates from the federal government. 

Another ITEP report found that 39 profitable companies paid no taxes over the three-year period from 2018 to 2020. This group included FedEx, Salesforce, Penske, and Advanced Micro Devices. And T-Mobile paid no taxes over that three-year period despite collecting $11.5 billion in profits. Another 79 profitable corporations paid less than half of the statutory rate of 21% between 2018 and 2020.    

Companies are able to pay little or no taxes in part due to "long-standing tax breaks preserved or expanded by the 2017 Tax Cuts and Jobs Act," the signature tax policy of former President Trump. Companies can continue to take advantage of tax loopholes, including huge write-offs for giving executives stock options, shifting profits off-shore, and accelerated depreciation of equipment purchases. But the statutory tax rate was also reduced from 35% to 21%. So, companies are taking these deductions off of a much smaller base. 

The Tax Cuts and Jobs Act was supposed to "broaden the base" by eliminating loopholes and lowering the rate. It ended up just lowering the rate and keeping most of the loopholes. As a result, many companies are paying little to nothing. 

And if Trump wins the 2024 presidential election, he may make even deeper cuts to the corporate tax rate.

Trump's plan for a second term

Since as early as September 2023, Trump’s advisors have been pushing him to endorse a 15% corporate tax rate – a number Trump initially proposed while president. In September, when asked in an interview if it was true he’d cut the corporate tax rate to 15%, Trump responded: “I’d like to lower them a little bit if we could.”  

But research shows that just 14% of Americans want to lower corporate taxes. In contrast, 65% of Americans say they are in favor of raising the corporate tax rate. The policy is even unpopular among Republicans: only 30% of conservative Republicans believe that businesses and companies should have lower tax rates. 

Recently, the Trump campaign has attempted to address this tension by claiming that cutting taxes for companies is not a priority and suggesting that corporate tax levels would remain unchanged under a second Trump term.

“In my most recent conversations with the president, he said that he really wants to focus more on small businesses than corporations,” Stephen Moore, an economic advisor to Trump, told the Post. “I think he’s fine with the corporate rate where it is. He wants to keep intact the tax cut we did in 2017.”

But, behind closed doors, Trump says he’s still “keenly interested” in reducing the corporate tax rate, the Washington Post reports. Trump’s policy advisors, the Washington Post writes, have also said privately that the corporate tax cut “should be expanded in a second term.”

According to the article, some of Trump’s aides were even open to a proposal that would lower the corporate tax rate to 14%. Grover Norquist, the anti-tax activist behind the pitch, told the Washington Post that he’d be “surprised” if Trump left the corporate tax rate unchanged. “All the people advising him before for sure think the 15 percent is where we need to go,” Norquist said.