A new analysis of corporate earnings finds that Duke Energy is among at least 55 large publicly traded U.S. companies that paid no federal income tax in 2020, a year in which it turned a more than $1 billion profit.
An analysis by the Institute on Taxation and Economic Policy, a progressive think tank, finds that Duke and other large companies used lower tax rates and tax incentives to eliminate their federal liability. In Duke’s case, those measures turned what could have been a $176 million income tax bill into a tax credit.
When companies don’t pay taxes, it leaves a gap in federal revenues, said the institute’s Matthew Gardner, who co-authored the report with Steve Wamhoff.
“When those revenues aren’t there because companies are avoiding tax, despite being profitable, that money has to come from somewhere else,” Gardner said. “It could come from hiking taxes on everybody else. More probable in the current climate, is that it’ll come from mortgaging our future (by) passing these costs on to the next generation, or maybe cutting spending-side initiatives.”
In other words, borrowing. Or the government could make up for tax breaks with spending cuts.
Among the federal tax changes that have helped big companies is the 2017 reduction in the corporate tax rate, from 35% to 21%. Gardner and others have noted that many companies used the extra money to buy back their own shares, which typically helps increase stock prices.
The report’s analysis says Duke had taxable U.S. profits in 2020 of $826 million. If it paid the straight 21% corporate income tax, it would have owed $176 million. But after tax breaks and other adjustments, including a $110 million credit for renewable energy investments, it wound up with a federal tax benefit — or refund — of $281 million.
By Gardner’s calculation, that works out to a tax rate of negative-34%.
“Measuring these effective tax rates is pretty much the best barometer we have of whether our tax system is tilted in favor of big business, against small business, in favor of businesses, against individuals,” Gardner said.
Gardner is quick to say that it doesn’t appear Duke or other companies are doing anything illegal. They’re just taking advantage of tax breaks as well as lower corporate tax rates. And that’s how Duke Energy sees it.
“Duke Energy fully complies with all federal and state tax laws,” said Duke spokeswoman Catherine Butler.
She says the company is benefiting from federal tax law changes, including one passed during the Trump administration that allows companies to write off the value of big investments more quickly — including solar and wind farms.