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McCain’s $45 Billion Tax Giveaways to 200 Largest Companies in America

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The centerpiece of presumptive Republican presidential candidate Sen. John McCain’s economic agenda is massive tax breaks for the wealthiest individuals and corporations in the United States. The cost to the federal budget: an estimated $300 billion a year, according to the Center for American Progress Action Fund’s analysis of the McCain campaign’s public materials.

Almost two-thirds of these tax breaks, about $175 billion a year, will flow to U.S. corporations, including $45 billion for the 200 most profitable companies in America. When the United States faces so many urgent challenges, at home and abroad, delivering tens of billions of dollars to the most competitive U.S. companies is a particularly egregious misuse of public resources.

Specifically, under the tax plan offered by McCain (R-AZ):

  • The largest 200 corporations (as identified by Fortune magazine) in America would get a combined $45 billion-a-year tax break.1 These companies earned more than $500 billion in profits in 2007.
  • Eight companies—Wal-Mart Stores Inc., ExxonMobil Corp, ConocoPhillips Co., Bank of America Corp., AT&T, Berkshire Hathaway Inc., JPMorgan Chase & Co., and Microsoft Corp—would each receive over $1 billion a year.
  • Like the earmarks McCain criticizes, the corporate tax breaks would “restrict America’s ability to address genuine national priorities.”.2 This $45 billion, for example, would more than pay for key anti-poverty steps, including cutting taxes on low-income workers and families and expanding federal assistance for childcare. Using this $45 billion more wisely we would lift more than 9 million people out of poverty.3

McCain’s Tax Plan

McCain has proposed $300 billion a year in four large tax breaks.4 First, he would slash the corporate tax rate to 25 percent from 35 percent. Second, he would allow corporations to immediately write off—or expense, in tax accounting terminology—the cost of corporate investments in equipment and technology. Third, he would repeal the Alternative Minimum Tax. Finally, he would double the exemption for dependents to $7,000.

The two corporate tax breaks are extremely expensive, costing the U.S. Treasury Department $100 billion and $75 billion a year, respectively. Corporate tax breaks are also extremely regressive. Corporate taxes are ultimately paid by investors, according to the longstanding view of the Treasury and the Congressional Budget Office. As a result, approximately 59 percent of these tax cuts would go to the top 1 percent of households. Only 11 percent of the benefit would go to the bottom 80 percent of households.

Finally, these corporate tax breaks are unlikely to help the economy. They drive up the federal budget deficit, resulting in higher interest rates and lower private-sector investment. Taxes paid by U.S. corporations are among the lowest in the world, measured as a share of the economy. And as Michigan University law professor Revuen Avi-Yonah points out, “experience indi cates that corporate rate cuts, like the temporary reduction in the tax rate on dividends from foreign subsidiaries from 35 percent to 5.25 percent, have resulted in increased profits for U.S. corpora tions but no increase in jobs or overall economic growth.”5

The U.S. corporate tax code is in need of wholesale reform, not just more tax breaks. The nominal U.S. corporate tax rate is among the highest in the world, but actual taxes are among the lowest because of the large number of corporate tax shelters. A balanced reform that reduces the tax rate by removing tax preferences could strengthen the economy without driving up the federal budget deficit or making the U.S. tax code more regressive. But cutting corporate tax rates without taking on special-interest tax breaks—as Sen. McCain wants to do if he becomes president—is an unwise giveaway to corporations.

Tax Cuts for the Fortune 200

The reduction in the corporate tax rate alone would cut taxes for America’s 200 largest companies by $45 billion a year. These companies’ 2007 profits exceeded $508 billion. The average Fortune 200 companies collected $2.5 billion in profits in 2007 (see Table 1 below).

The McCain tax plan also showers additional tax breaks on highly profitable industries (see Table 2 below). It includes $6.5 billion for Fortune 200 energy companies, $6.3 billion for Fortune 200 banks and financial institutions, and $5.6 billion for Fortune 200 merchandising and retailing companies.

These tax reductions are far larger than the earmarks McCain regularly criticizes. Earmarks total about $18 billion a year, according to Taxpayers for Common Sense.6 And there are only about $9 billion a year in wasteful earmarks that could be eliminated, according to the Heritage Foundation.7

In short, McCain’s tax breaks for the Fortune 200 alone amount to more than twice current annual earmarks and more than four times the amount of wasteful earmarks he could eliminate, as identified by a prominent conservative think tank.

Conclusion

Over the past eight years, U.S. corporate profits have grown along with the U.S. economy while workers’ wages have stagnated. But the centerpiece of Sen. McCain’s economic policies is a huge break of $300 billion to the nation’s wealthiest individuals and most profitable companies. These misdirected resources instead could be used to meet the needs of struggling families. For example, they could help lift more than 9 million families out of poverty.

Tax Breaks for the Fortune 200 Companies Under McCain’s Tax Plan
Fortune Rank
Companys
2007 Worldwide Profits
2007 U.S. Taxes
Savings Under McCain
1 Wal-Mart Stores $13 billion $5 billion $1.4 billion
2 Exxon Mobil $41 billion $4.6 billion $1.3 billion
3 Chevron $19 billion $1.4 billion $400 million
4 General Motors -39 billion $380 million $110 million
5 ConocoPhillips $12 billion $4 billion $1.1 billion
6 General Electric $22 billion $87 million $25 million
7 Ford Motor -$2.7 billion * *
8 Citigroup $3.6 billion * *
9 Bank of America Corp. $15 billion $4.5 billion $1.3 billion
10 AT&T $12 billion $5.5 billion $1.6 billion
11 Berkshire Hathaway $13 billion $6.6 billion $1.9 billion
12 J.P. Morgan Chase & Co. $15 billion $3.9 billion $1.1 billion
13 American International Group $6.2 billion $1.5 billion $400 million
14 Hewlett-Packard $7.3 billion $870 million $250 million
15 International Business Machines $10 billion $1.1 billion $310 million
16 Valero Energy $5.2 billion $1.8 billion $500 million
17 Verizon Communications $5.5 billion $3 billion $850 million
18 McKesson $910 million $370 million $100 million
19 Cardinal Health $1.9 billion $300 million $85 million
20 Goldman Sachs Group $12 billion $3 billion $870 million
21 Morgan Stanley $3.2 billion * *
22 Home Depot $4.4 billion $1.8 billion $520 million
23 Procter & Gamble $10 billion $2.9 billion $830 million
24 CVS Caremark $2.7 million $1.5 million $400 million
25 UnitedHealth Group $4.7 billion $2.5 billion $710 million
26 Kroger $1.2 billion $730 million $210 million
27 Boeing $4.1 billion $1.7 billion $500 million
28 AmerisourceBergen $470 million $260 million $74 million
29 Costco Wholesale $1.1 billion $400 million $115 million
30 Merrill Lynch -$7.8 billion * *
31 Target $2.8 billion $1.5 million $430 million
32 State Farm Insurance Cos. $5.5 billion ** **
33 WellPoint $3.3 billion $1.8 billion $500 million
34 Dell $2.9 billion $600 million $170 million
35 Johnson & Johnson $11 billion $2.2 billion $630 million
36 Marathon Oil $4 billion $1.3 billion $370 million
37 Lehman Brothers Holdings $4.2 billion $530 million $150 million
38 Wachovia Corp. $6.3 billion $2.1 billion $590 million
39 United Technologies $4.2 billion $430 million $120 million
40 Walgreen $2 billion $1 billion $300 million
41 Wells Fargo $8.1 billion $3.1 billion $900 million
42 Dow Chemical $2.9 billion $220 million $60 million
43 MetLife $4.3 billion $300 million $85 million
44 Microsoft $14 billion $4.9 billion $1.4 billion
45 Sears Holdings $830 million $330 million $94 million
46 United Parcel Service $390 million * *
47 Pfizer $8.1 billion * *
48 Lowe’s $2.8 billion $1.5 billion $430 million
49 Time Warner $4.4 billion $1.7 billion $500 million
50 Caterpillar $3.5 billion $920 million $260 million
51 Medco Health Solutions $910 million $480 million $130 million
52 Archer Daniels Midland $2.2 billion $670 million $190 million
53 Fannie Mae -$2.1 billion * *
54 Freddie Mac -$3.1 billion * *
55 Safeway $890 million $370 million $110 million
56 Sunoco $890 million $400 million $120 million
57 Lockheed Martin $3.0 billion $1.3 billion $370 million
58 Sprint Nextel -$29 million $130 million $37 million
59 PepsiCo $5.7 billion $1.4 billion $410 million
60 Intel $7 billion $1.7 billion $490 million
61 Altria Group $9.8 billion $2 billion $590 million
62 Supervalu $450 million $320 million $92 million
63 Kraft Foods $2.6 billion $420 million $120 million
64 Allstate $4.6 billion $2 billion $580 million
65 Motorola -$49 million * *
66 Best Buy $1.4 billion $660 million $190 million
67 Walt Disney $4.7 billion $2.3 billion $640 million
68 FedEx $2 billion $920 million $260 million
69 Ingram Micro $280 million $50 million $14 million
70 Sysco $1 billion $540 million $150 million
71 Cisco Systems $7.3 billion $1.4 billion $410 million
72 Johnson Controls $1.3 billion $30 million $9 million
73 Honeywell International $2.4 billion $470 million $140 million
74 Prudential Financial $3.7 billion $520 million $150 million
75 American Express $4 billion $35 million $10 million
76 Northrop Grumman $1.8 billion $670 million $190 million
77 Hess $1.8 billion $60 million $18 million
78 GMAC -$2.3 billion $380 million $110 million
79 Comcast $2.6 billion $1.4 billion $400 million
80 Alcoa $2.6 billion $700 million $200 million
81 DuPont $3 billion $420 million $120 million
82 New York Life Insurance $1.1 billion $110 million $33 million
83 Coca-Cola $6 billion $760 million $220 million
84 News Corp. $3.4 billion $280 million $80 million
85 Aetna $1.8 billion $900 million $260 million
86 TIAA-CREF $1.4 billion ** **
87 General Dynamics $2 billion $850 million $240 million
88 Tyson Foods $270 million $130 million $40 million
89 HCA $870 million $180 million $50 million
90 Enterprise GP Holdings $110 million $8 million $2 million
91 Macy’s $890 million $360 million $100 million
92 Delphi -$3 billion * *
93 Travelers Cos. $4.6 billion $1.5 billion $430 million
94 Liberty Mutual Insurance Group $1.5 billion $550 million $160 million
95 Hartford Financial Services $2.9 billion $910 million $260 million
96 Abbott Laboratories $3.6 billion $540 million $160 million
97 Washington Mutual -$67 million $300 million $85 million
98 Humana $830 million $220 million $60 million
99 Massachusetts Mutual Life Insurance $720 million $180 million $50 million
100 3M $4 billion $900 million $260 million
101 Merck $3.2 billion * *
102 Deere $1.8 billion $480 million $140 million
103 Apple $3.5 billion $1.3 billion $370 million
104 Countrywide Financial -$700 million * *
105 Tech Data $110 million $44 million $13 million
106 McDonald’s $2.4 billion $470 million $130 million
107 Publix Super Markets $1.2 billion $620 million $180 million
108 Nationwide $2 billion $190 million $50 million
109 AMR $500 million $170 million $50 million
110 Northwestern Mutual $1 billion $21 million $6 million
111 Emerson Electric $2 billion $420 million $120 million
112 Raytheon $2.6 billion $500 million $140 million
113 Wyeth $4.6 billion $940 million $270 million
114 International Paper $1.2 billion $230 million $70 million
115 Electronic Data Systems $720 million $180 million $50 million
116 Tesoro $570 million $280 million $80 million
117 Constellation Energy $820 million $350 million $100 million
118 Coca-Cola Enterprises $710 million $110 million $30 million
119 Goodyear Tire & Rubber $600 million $3 million $1 million
120 Manpower $480 million $50 million $13 million
121 Plains All American Pipeline $360 million *** ***
122 U.S. Bancorp $4 billion $1.6 billion $470 million
123 Occidental Petroleum $5.4 billion $1.4 billion $410 million
124 UAL $400 million $30 million $90 million
125 Bristol-Myers Squibb $2 billion $110 million $30 million
126 J.C. Penney $1.1 billion $530 million $150 million
127 Whirlpool $640 million $0 $0
128 Staples $1 billion $400 million $115 million
129 Delta Air Lines $1.6 billion * *
130 Capital One Financial $1.6 billion 1.1 billion $330 million
131 Exelon $2.7 billion $2.7 billion $780 million
132 TJX $770 million $310 million $90 million
133 Eli Lilly $3 billion $540 million $160 million
134 Murphy Oil $770 million $140 million $40 million
135 Express Scripts $570 million $1.3 billion $360 million
136 Kimberly-Clark $1.8 billion $220 million $60 million
137 Oracle $4 billion $920 million $260 million
138 AutoNation $280 million $150 million $45 million
139 Loews $2.5 billion $1.3 billion $370 million
140 Freeport-McMoRan Copper & Gold $3 billion $160 million $50 million
141 Cigna $1 billion $460 million $130 million
142 Rite Aid $27 million $730 million $210 million
143 DirecTV Group $1.4 billion *** ***
144 Xerox $1 million $120 million $40 million
145 CHS $750 million $30 million $8 million
146 United States Steel $880 million $130 million $40 million
147 Weyerhaeuser $790 million $36 million $10 million
148 Fluor $530 million $400 thousand $110 thousand
149 Anheuser-Busch $2.1 billion $800 million $230 million
150 Google $4.2 billion $520 million $150 million
151 Nucor $1.5 billion $700 million $200 million
152 Kohl’s $1 billion $590 million $170 million
153 Nike $1.5 billion $390 million $110 million
154 Union Pacific $1.9 billion $1.2 billion $340 million
155 Illinois Tool Works $1.9 billion $490 million $140 million
156 Bear Stearns $230 million ** **
157 Lear $240 million $21 million $6 million
158 Arrow Electronics $410 million $95 million $30 million
159 Anadarko Petroleum $3.8 billion * *
160 Burlington Northern Santa Fe $1.8 billion $990 million $280 million
161 Dominion Resources $2.5 billion $1.6 billion $460 million
162 Gap $830 million $370 million $110 million
163 Avnet $390 million $85 million $25 million
164 Office Depot $400 million $120 million $35 million
165 AFLAC $1.6 billion $190 million $55 million
166 Southern $1.7 billion $730 million $210 million
167 Halliburton $3.5 billion * *
168 FPL Group $1.3 billion $310 million $90 million
169 Paccar $1.2 billion $160 million $50 million
170 Computer Sciences $390 million $180 million $52 million
171 Amazon.com $480 million $180 million $50 million
172 Bank of New York Mellon Corp. $2 billion $700 million $200 million
173 Amgen $3.1 billion $600 million $170 million
174 TRW Automotive Holdings $90 million * *
175 Progressive $1.2 billion $500 million $140 million
176 United Services Automobile Assn. $1.9 billion ** **
177 Centex $270 million * *
178 Continental Airlines $460 million $200 million $57 million
179 Health Net $190 million $150 million $43 million
180 Chubb $2.8 billion $960 million $280 million
181 CBS $1.2 billion $690 million $200 million
182 L-3 Communications $760 million $320 million $90 million
183 AES -$95 million $7 million $2 million
184 Sun Microsystems $473 million * *
185 Texas Instruments $2.7 billion $770 million $220 million
186 Colgate-Palmolive $1.7 billion $270 million $78 million
187 Qwest Communications $2.9 billion $140 million $41 million
188 World Fuel Services $65 million $4 million $1 million
189 Toys ‘R’ Us $65 million $32 million $9 million
190 Pepsi Bottling $530 million $130 million $36 million
191 Viacom $1.8 billion $660 million $190 million
192 Oneok $300 million $160 million $45 million
193 SunTrust Banks $1.6 billion $590 million $170 million
194 Penske Automotive Group $130 million $30 million $9 million
195 Consolidated Edison $230 million $360 million $100 million
196 American Electric Power $1 billion $500 million $140 million
197 Marriott International $700 million $310 million $90 million
198 Public Service Enterprise Group $1.3 billion $840 million $240 million
199 Waste Management $1.2 billion $500 million $140 million
200 PG&E Corp. $1 billion $445 million $130 million
TOTAL $508 billion   $44.5 billion

 

Tax Breaks by Corporate Sector Under McCain’s Tax Plan
Fortune 200 Companies by Sector McCain Tax Cut
Energy, Oil & Utilities $6.5 billion
Banks & Finance $6.3 billion
Merchandising/Retail $5.6 billion
Insurance $5.0 billion
Media & Telecom $4.5 billion
Computing & IT $4.3 billion
Health Care $4.0 billion
Heavy Industry $3.1 billion
Consumer Goods $2.0 billion
Food & Agriculture $1.7 billion
Misc. Services $1.0 billion
Transport Services $1.0 billion

 

Methodology

The estimates of corporate savings were calculated based upon information presented in the companies’ most recent 10-K filings with the Securities and Exchange Commission, which include audited financial statements.8 The figures reported on tax returns—which are not made public—may differ because corporations employ different methodologies for calculating income for accounting and tax purposes. The estimates are based on the financial statements’ reported current and deferred taxes paid in 2007 to the federal government for income earned from U.S. operations.

The figures present each corporation’s estimated savings from reducing the corporate tax to 25 percent from 35 percent. They do not include savings from Sen. McCain’s expensing proposal because there is no reliable way to estimate how those savings will be distributed across companies. They also exclude U.S. taxes on income earned from foreign operations. Finally, the figures do not include any offsetting tax increases resulting from McCain’s promise to eliminate corporate tax subsidies because the campaign has not presented specific proposals.

Several companies reported that 2007 taxes were negative (known as a “tax asset”). Companies with a “net operating loss” can use those losses to offset profits earned in the prior two years and receive a refund of taxes paid in those years. Net operating losses can be caused by business factors or by tax subsidies such as accelerated depreciation. Presumably the McCain proposal would not alter corporations’ ability to use net operating losses to offset prior years’ tax bills, and therefore these companies’ potential savings under the McCain plan are assumed to be zero.

The estimates are based on 2007 figures. The actual effect of the McCain proposals will depend on corporations’ future performance. Figures may not add due to rounding.

Endnotes

1. As identified by Fortune magazine. Fortune, “Fortune 1000,” May 5, 2008.

2.John McCain, “McCain Tax Cut Plan,” John McCain for President 2008.

3.The Center for American Progress Task Force on Poverty, “From Poverty to Prosperity: A National Strategy to Cut Poverty in Half” (Washington: Center for American Progress, 2007).

4.Based on information publicly available from the McCain campaign website and news accounts. The Tax Policy Center has recently released an analysis of McCain’s plan, apparently based on new information from the McCain campaign that clarifies and in at least one instance contradicts the campaign’s public policy documents. Our analysis continues to rely on the public materials, which we regard as authoritative.

5.Reuven Avi-Yonah, “John McCain’s Corporate Tax Agenda: A Critical Examination” (Washington: Center for American Progress Action Fund, 2008).

6.Taxpayers for Common Sense, “Taxpayers for Common Sense Releases New Earmark Database,” February 14, 2008.

7.Michael Dobbs, “McCain’s Fantasy War on Earmarks,” Washington Post, May 23, 2008.

8.Financial data compiled from “Form 10-K: Notes to Consolidated Financial Statement,” SEC filing of each company. Please see individual company websites for further details on filings.

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