WSJ: Some Top Companies Avoided Federal Income Tax Under Bush

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Some Top Companies Avoided Federal Income Tax Under Bush

Study Names 82 Concerns With Big Breaks at Least One Year From 2001 to '03

By JOHN D. MCKINNON and ROB WELLS
Staff Reporters of THE WALL STREET JOURNAL
September 23, 2004; Page A2

Eighty-two of the country's largest profitable corporations paid no federal income tax for at least one year of the Bush administration's first three years, a study found. The study by Citizens for Tax Justice, a liberal-leaning think tank in Washington, and the affiliated Institute on Taxation and Economic Policy, examined 275 Fortune 500 corporations with total cumulative profits of $1.1 trillion in 2001, 2002 and 2003. One-third paid no federal income taxes in at least one of those years, and many received refunds of taxes paid in prior years.

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Under President Bush, several corporate-tax breaks have been expanded temporarily. That, with sagging profits and improper tax shelters, has driven down corporate-tax receipts as a share of the economy, to 1.2% in 2003, the second-lowest rate recorded in the post-World War II era.

Democratic presidential candidate John Kerry has sought to exploit the issue. An economic adviser, Jason Furman, said the study shows Mr. Bush is "utterly hypocritical" when he talks about advancing a tax overhaul in a second term. The administration has failed to back many needed loophole closers, Mr. Furman said, while it pushed through the expansions of corporate-tax breaks in 2002 and 2003 that are a focus of the study's criticism.

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General Electric Co. topped the list of companies with the largest total tax breaks, at $9.5 billion during the three-year period. It was followed by SBC Communications Inc. with $9 billion, Citigroup Inc., $4.6 billion, and International Business Machines Corp., $4.6 billion. GE spokesman David Frail said GE had a lower tax rate in 2002 largely because of a $3.5 billion pretax charge involving its reinsurance business. He said GE, like many other businesses, deferred some taxes it will pay in coming years. According to its annual report, GE paid $137 million in 2002 and deferred $2.1 billion in taxes that year. SBC's vice president of finance, John Stephens, said it paid $15 billion in all federal taxes during the period. "We are carrying a significant tax burden," he said. He also said the study included income adjustments that shouldn't be counted for purposes of determining its effective tax rate. Citigroup had no comment on the study and IBM didn't respond to requests for comment.

---- Kathryn Kranhold contributed to this article.

Write to John D. McKinnon at [e-mail]1 and Rob Wells at [e-mail]

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