Key Takeaways
- • The Institute on Taxation and Economic Policy (ITEP) found more than 700 profitable corporations paid an effective federal income tax rate of 10.4% last year, less than half the 21% statutory rate, according to its report based on SEC filings.
- • 114 companies, including Tesla, Walt Disney, United Airlines and DoorDash, paid no current federal income tax, but ITEP senior fellow Matt Gardner argues the 706 reduced-rate companies, which saved a combined $198 billion, are the bigger threat to revenue.
- • Treasury data showed corporate income tax revenue fell about 15%, or roughly $70 billion, to $381 billion in the fiscal year ended Sept. 30, part of a more than 25% decline since 2024.
- • Alphabet, Microsoft, Amazon and Meta saved a collective $46 billion through immediate R&D expensing and 100% bonus depreciation, provisions enacted under the One Big Beautiful Bill Act.
- • The Congressional Budget Office projects the OBBBA will add $3.4 trillion to the federal deficit over the next decade, even as corporate profits reached a record $4.7 trillion.
Summary
The effective U.S. corporate income tax rate is at its lowest level in decades, according to a recent report from the Institute on Taxation and Economic Policy (ITEP), a progressive think tank. The report found that more than 700 profitable corporations paid 10.4% in current federal income taxes last year, less than half the 21% statutory rate. More than 250 of those companies paid effective rates below 7%, and 114 companies, including Tesla, Walt Disney, United Airlines and DoorDash, paid no current federal income tax. ITEP based its calculations on annual financial reports filed with the Securities and Exchange Commission rather than IRS data, which lags behind SEC filings.
Corporate tax revenue has declined sharply. Treasury Department data showed a roughly 15% reduction, about $70 billion, to $381 billion in the fiscal year that ended Sept. 30, and a more than 25% decline since 2024. The Congressional Budget Office projects the One Big Beautiful Bill Act (OBBBA) will add $3.4 trillion to the federal deficit over the next decade, reflecting a $4.5 trillion revenue reduction partly offset by $1.1 trillion in spending cuts. Corporate profits, meanwhile, rose to a record $4.7 trillion over the 12 months through mid-2026, a 17% increase from the prior twelve-month period.
Matt Gardner, ITEP senior fellow and coauthor of the report, said the greater fiscal concern lies with the hundreds of companies paying reduced rates rather than the 114 paying nothing. According to the report, the 706 companies saved a total of $198 billion last year through corporate tax subsidies. The four largest beneficiaries, Alphabet, Microsoft, Amazon and Meta, saved a collective $46 billion from immediate R&D expensing and 100% bonus depreciation, which ITEP says helped fund AI infrastructure build-outs. Gardner told Fortune that these provisions are likely to remain the new normal unless future Congresses or administrations reverse them.
Meta has drawn scrutiny over its use of the R&D credit. Per reports cited by senators, the company classified AI data centers as experimental "pilot models" to qualify. Seven Democratic senators, led by Ron Wyden, wrote to Meta CEO Mark Zuckerberg demanding answers by Oct. 31. Meta said it invested more than $200 billion in R&D over the past five years and $57 billion last year, and that AI-optimized data centers require extensive testing that cannot be simulated.
Some policy experts argue against raising corporate taxes. Adam Michel, director of tax policy studies at the libertarian Cato Institute, wrote in an April Substack post that the R&D credit has had bipartisan support since 1981 and that depreciation breaks lower taxable income without reducing nominal tax payments, encouraging investment. Michel wrote that the breaks "don't reveal a scandal" and are "a list of popular, bipartisan policies."
Corporate tax revenue has declined sharply. Treasury Department data showed a roughly 15% reduction, about $70 billion, to $381 billion in the fiscal year that ended Sept. 30, and a more than 25% decline since 2024. The Congressional Budget Office projects the One Big Beautiful Bill Act (OBBBA) will add $3.4 trillion to the federal deficit over the next decade, reflecting a $4.5 trillion revenue reduction partly offset by $1.1 trillion in spending cuts. Corporate profits, meanwhile, rose to a record $4.7 trillion over the 12 months through mid-2026, a 17% increase from the prior twelve-month period.
Matt Gardner, ITEP senior fellow and coauthor of the report, said the greater fiscal concern lies with the hundreds of companies paying reduced rates rather than the 114 paying nothing. According to the report, the 706 companies saved a total of $198 billion last year through corporate tax subsidies. The four largest beneficiaries, Alphabet, Microsoft, Amazon and Meta, saved a collective $46 billion from immediate R&D expensing and 100% bonus depreciation, which ITEP says helped fund AI infrastructure build-outs. Gardner told Fortune that these provisions are likely to remain the new normal unless future Congresses or administrations reverse them.
Meta has drawn scrutiny over its use of the R&D credit. Per reports cited by senators, the company classified AI data centers as experimental "pilot models" to qualify. Seven Democratic senators, led by Ron Wyden, wrote to Meta CEO Mark Zuckerberg demanding answers by Oct. 31. Meta said it invested more than $200 billion in R&D over the past five years and $57 billion last year, and that AI-optimized data centers require extensive testing that cannot be simulated.
Some policy experts argue against raising corporate taxes. Adam Michel, director of tax policy studies at the libertarian Cato Institute, wrote in an April Substack post that the R&D credit has had bipartisan support since 1981 and that depreciation breaks lower taxable income without reducing nominal tax payments, encouraging investment. Michel wrote that the breaks "don't reveal a scandal" and are "a list of popular, bipartisan policies."
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