Skip to comments.America’s Companies Paying the Most in Taxes
Posted on 03/15/2013 8:52:31 AM PDT by SeekAndFind
There has been a bruising battle over how much Americas largest corporations should pay in taxes, especially as the size of the federal budget deficit grows. While on paper the federal corporate tax rate is 35%, companies usually pay far less than that because of loopholes and subsidies. That has caused some activists to say that companies should pay the full rate regardless of special accounting charges, or if some revenue is earned overseas. Still, several huge American companies pay the 35% rate, and because of their size, the amount is well into the billions of dollars. The companies paying the most in taxes tend to fall into only a few categories. The first is huge oil companies that often post outsized profits every year. They are both large and getting larger as the price of oil rises and remains near historic highs.
Another group of companies that pays very high taxes are the large tech companies, particularly those that have been around for some time. Unlike the darlings of the moment such as Facebook Inc. (NASDAQ: FB), Microsoft Corp. (NASDAQ: MSFT) pays tremendous taxes and has done so for many years. Even though its growth has slowed, it continues to be very profitable.
The third group is the most unlikely, at least in the eyes of most investors. The banking industry was nearly ruined by the 2008 global financial crisis. However, since then banks have bounced back, and many have huge profits from trading and investment banking operations, and even from renewed demand for mortgages.
Oddly, while some politicians and the public would like to see the tax burden on the mammoth companies raised, other experts want to see the tax rate reduced. Organizations such as the Tax Foundation have made the case that lower taxes will encourage companies to add workers, expand and make more purchases of plants and other equipment. While this opinion is probably not very popular, it illustrates how complex the issue of corporate taxes can be.
Regardless of how this debate will shake out, each of the 10 companies on this list paid at least $4 billion in taxes, and one of them, Exxon Mobil Corp. (NYSE: XOM), paid more than $30 billion. It is at least some evidence that Americas large companies often pay extraordinary amounts.
To identify the companies that pay the most taxes, 24/7 Wall St. reviewed corporate tax payments for the top 150 companies by revenue. Included in our analysis were company financials, including income, employee count and earnings before taxes. These were either provided by Capital IQ, or obtained by 24/7 Wall St. reviews of SEC filings or financial statements. All data, including taxes paid, are for 2012, or the most recent complete fiscal year.
These are the companies paying the most in taxes.
> Income tax expense: $4.57 billion
> Earnings before taxes: $20.03 billion
> Revenue: $72.93 billion
> 1-yr. share price change: -12.04%
> Industry: Software
In an industry in which success is often measured against fast-growing Google Inc. (NASDAQ: GOOG) and Apple Inc. (NASDAQ: AAPL), Microsoft has been maligned for its lack of innovation and the resulting poor growth. What is ignored in that analysis is that Microsoft is a money machine and has huge operating margins in two of its oldest divisions. Microsoft had a net income of $6.38 billion in its fiscal second quarter on revenue of $21.5 billion. The Windows division alone had an operating income of $3.3 billion on revenue of $5.9 billion, a 56% margin. The business division had an operating income of $3.6 billion on $5.7 billion in revenue, a 63% margin. Other divisions, however, dragged down results. Microsofts online operations, including its Bing search engine and its entertainment division, which markets Xbox products, posted operating losses. Largely due to the success of the two older operations, Microsoft has paid more than $5 billion in taxes in four of the past five years.
> Income tax expense: $5.30 billion
> Earnings before taxes: $21.90 billion
> Revenue: $104.51 billion
> 1-yr. share price change: 7.57%
> Industry: IT consulting
International Business Machines Corp. (NYSE: IBM), by most measures, is the second largest technology company in the United States, just behind Hewlett-Packard Co. (NYSE: HPQ). However, there are significant differences between the two. Most notably, HP is falling apart, while IBMs continued financial success, most recently under its first female CEO, Ginni Rometty, has landed it on this list. One of the most critical reasons for IBMs success is that it operates in a broad array of businesses, which means it does not have to rely on a single sector of the tech world. While IBMs hardware operations are best known for its long line of mainframes, its software operations and IT services division are just as large. IBM is also geographically diversified, and very large parts of its annual sales come from Europe and Asia.
8. Berkshire Hathaway
> Income tax expense: $6.92 billion
> Earnings before taxes: $22.24 billion
> Revenue: $162.46 billion
> 1-yr. share price change: 31.01%
> Industry: Asset management
The house that Warren Buffett built continues to grow. Buffett bought huge railroad company Burlington Northern Santa Fe in 2009 for $34 billion. More recently, he agreed to buy Heinz with investment company 3G Capital. The sticker price on the transaction is $23 billion. Berkshire Hathaway Inc. (NYSE: BRK-A) continues to remain something of a mutual fund as the company owns large positions in American Express Co. (NYSE: AXP), Coca-Cola Co. (NYSE: KO), ConocoPhillips (NYSE: COP) and General Electric Co. (NYSE: GE). Berkshires recent earnings were also bolstered by its derivatives trading operations.The company booked a $1.4 billion gain from this activity in the fourth quarter.
7. J.P. Morgan
> Income tax expense: $7.63 billion
> Earnings before taxes: $28.92 billion
> Revenue: $91.66 billion
> 1-yr. share price change: 24.30%
> Industry: Financial services
Almost all the recent news about J.P. Morgan Chase & Co. (NYSE: JPM) has been negative. What was once considered the best-run bank in the United States has gone through a series of missteps, the most visible of which was a $6 billion trading loss in its London offices. As a result of the catastrophe, the bank agreed with the U.S. Comptroller of the Currency that it would improve oversight of its trading operations. The loss also cost several senior J.P. Morgan executives their jobs and tarnished the reputation of the banks highly visible CEO, Jamie Dimon. And, within the last few days, a Senate panel has accused the bank of a cover-up. Despite those issues, J.P. Morgans earnings have been solid and rose 53% in the fourth quarter, largely due to strong results in its mortgage operations.
> Income tax expense: $7.94 billion
> Earnings before taxes: $15.42 billion
> Revenue: $60.35 billion
> 1-yr. share price change: -22.86%
> Industry: Energy exploration and production
ConocoPhillips joins its larger rivals Exxon and Chevron Corp. (NYSE: CVX) on the top tax payer list. By sales, ConocoPhillips was the fourth largest public corporation in the U.S. until it recently broke itself into two pieces. One of the new companies, Phillips 66 (NYSE: PSX), holds the former parents downstream assets those that handle refining and marketing. The rest of ConocoPhillips, which kept the parents name, is the largest of all the U.S.-headquartered exploration and production companies. Among the companys initiatives are plans to drill above the Arctic Circle beginning in 2014. The move is risky. Competitor Royal Dutch Shell PLC (NYSE: RDS-A) recently stopped its operations in the same area due to engineering problems. ConocoPhillips also has significant assets in the Far East and runs the deepwater drilling operations in Chinas largest offshore oil field.
> Income tax expense: $7.98 billion
> Earnings before taxes: $25.74 billion
> Revenue: $469.16 billion
> 1-yr. share price change: 21.87%
> Industry: Supermarkets
Wal-Mart Stores Inc. (NYSE: WMT) is the largest company in the United States and the largest employer. Unlike some of the other companies on the highest taxpayer list, particularly the banks and oil companies, Walmart is relatively young, founded in 1962. Since that time, expansion has outpaced traditional American retailers, such as Sears, Kmart and J.C. Penney Co. Inc. (NYSE: JCP), each of which has struggled as Walmart has expanded. Walmarts annual tax payment has been above $7 billion in each of its past five fiscal years. Walmarts size has become something of a disadvantage because it is hard for the retailer to grow much faster than the economy in general. Recently, the companys U.S. same-store sales were up only 2.2% In a recent conversation with the media, Charles M. Holley Jr., Walmarts chief financial officer, said I dont think the economys helping us.
4. Wells Fargo
> Income tax expense: $9.10 billion
> Earnings before taxes: $28.47 billion
> Revenue: $79.45 billion
> 1-yr. share price change: 16.77%
> Industry: Banks
Wells Fargo & Co. (NYSE: WFC) is often considered the most successful of the four U.S. money center banks, the others being Citigroup Inc. (NYSE: C), J.P. Morgan Chase and Bank of America Corp. (NYSE: BAC). Since the start of 2008 (when the bank bought Wachovia and nearly doubled its size), the year of the global financial crisis, Wells Fargo shares have rallied more than those of the other three. Wells Fargos success is largely due to the fact that it has not relied heavily on investment banking and proprietary trading. The former is considered an unreliable source of revenue, the latter risky. Wells Fargo leans more on consumer banking. And its national customer base tends to be concentrated in a few markets that it dominates. That keeps the firms cost of maintaining large numbers of branches low. As Morningstar recently commented, more than one third of the banks deposits come from markets in which Wells Fargo is the preeminent player, and more than two thirds are gathered in markets in which the company ranks among the top three. Wells Fargos annual tax bill dropped as low as $602 million in 2008, and has risen steadily each year since.
> Income tax expense: $14.21 billion
> Earnings before taxes: $55.96 billion
> Revenue: $164.69 billion
> 1-yr. share price change: -20.68%
> Industry: Computer hardware
Apple has made a furious race up the ladder of top corporate tax payers. As appeal for its iPad, iPhone and Mac products has exploded, its tax payments have gone from $2 billion four years ago to $4.5 billion two years ago. And it has increased threefold since then. But these days Apple is facing several growth challenges, which could threaten its spot near the top of the tax tables and already have cut its stock price by one-quarter from record levels. Due to the iPhones success, Apple was the dominant producer of smartphones since 2007. But Samsung passed Apple in smartphone sales in 2011. The iPads dominance, too, has been threatened by Google Android-based tablets, the growth of which will put it ahead of Apple iOS-based products this year, according to research firm IDC. Other threats to Apples growth include the fact that its success in the mammoth Chinese market has been very modest.
> Income tax expense: $20.00 billion
> Earnings before taxes: $46.33 billion
> Revenue: $222.58 billion
> 1-yr. share price change: 9.52%
> Industry: Oil and gas
It is somewhat unfair to say that Chevron is a more modest sized version of Exxon, but in many cases it is. Chevron is the third largest public company in the U.S. based on sales, just above another energy multinational, ConocoPhillips, which was recently broken into two parts. Chevron has paid more than $10 billion a year in taxes in every year except one since 2005. And its revenue since the same year has only once dropped below $200 billion during that time. Like other large energy companies, it has added liquid natural gas to its reserve base, because natural gas currently accounts for 23% of the worlds energy consumption. One challenge Chevron faces as it moves forward is the difficulty of finding new oil fields. This will require Chevron to make greater and greater efforts at deepwater drilling and oil sands production. Chevron is sanguine about its long-term prospects; it expects to increase production 20% by 2017.
1. Exxon Mobil
> Income tax expense: $31.05 billion
> Earnings before taxes: $78.73 billion
> Revenue: $428.38 billion
> 1-yr. share price change: 6.56%
> Industry: Oil and gas
Large multinational oil companies have been among the largest payers of corporate federal taxes for years. Exxons income tax amount was approximately the same in 2011 as it was in 2012 $31 billion. A simple reason for Exxons position at the top of the tax paying list is its size. It vies with Walmart each year for the spot as the publicly traded U.S. company with the greatest revenue. Exxons revenue has averaged more than $400 billion a year from 2007 to 2012. Part of Exxons success is tied to the price of crude oil. A barrel of WTI crude was worth $35 in 2003. The price reached $60 in 2006 and rarely dropped below it thereafter. It rose above $100 in 2008 and has occasionally topped that price since then. Whether Exxon can stay atop both the tax and revenue list much longer depends on several factors, not the least of which are new sources of energy led by solar, wind and particularly shale-based fossil fuels. One benefit Exxon has that may allow it to keep the top position as Americas largest company is its role as the number one producer of natural gas.
Sorry, corporations don’t pay taxes; they collect them from their customers and pass them along to the government. Like any other cost of doing business, the cost of taxes is rolled into the price of their products. Any amount that can’t be included in their prices reduces their investors’ returns. Either way, the corporation isn’t really paying them - its customers or investors are.
Go ahead close all the loopholes create a flat corporate tax and in doing so eliminate most all of the Federal government’s influence over the behavior of our private sector.
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