NerdWallet Study: Top Companies Paid 9% U.S. Tax Rate

Apple logo

A recent NerdWallet study found that the top ten most profitable American companies paid an average of 9% of their pre-tax earnings in taxes to the U.S. federal government last year.  These same companies reported an average tax provision of 32%.

This information is available for 500 of America’s largest companies in the NerdWallet Tax Rate Transparency Tool.

Tax provision is the accounting metric for amount of taxes a company owes to all taxing entities, domestic and foreign.  It includes both taxes that will be paid in the current year and taxes that have been deferred to be paid later.

Because tax provision includes both domestic and foreign, current and deferred taxes, NerdWallet researched further to find how much was actually paid by these American companies to the U.S. federal government in the most recent tax year.  By dividing the current portion of federal taxes by pre-tax income, NerdWallet was able to calculate the percentage of these companies’ earnings that was paid to the U.S. government.  For the ten American companies with highest earnings in the most recent fiscal year, this number averaged 9%.

There are many reasons a company can legally pay less than the statutory tax rate of 35%, including timing differences between accounting and tax codes and by earning and recognizing a portion of their earnings in foreign countries with lower tax rates.  For example, Exxon Mobil conducts the majority of its business outside the U.S. and paid $28.8 billion in taxes to foreign governments, but only owed and paid $1.5 billion to the U.S. government.  There is nothing illegal or wrong about this.  NerdWallet’s mission is to bring transparency to financial markets so this data is presented to provide easy access to interesting information, not to pass judgment.  For more information on the optimal level of oil company taxation, please see the explanatory note by Professor Ben Ho of Vassar College.

Many believe that the current statutory tax rate of 35% is too high, including both presidential candidates.  The fact that many large American companies pay the majority of their taxes to foreign governments has been cited as evidence that the rate is too high.  Some believe that if corporate tax rates were lowered, American companies would recognize more of their profits domestically and have the net effect of increasing tax revenues.

Below are the ten most profitable U.S. companies with their taxes for last year, both total provision and payments to the U.S. government.  NerdWallet has also created a corporate tax rate tool with this information for 500 American companies.

#1 Exxon Mobil (XOM)

Pre-tax earnings: $73.3 Billion

Tax Provision: $31.1 Billion (42%)

Actual Taxes Paid to U.S. federal government: $1.5 billion (2%)

Exxon paid $1.5 billion to the U.S. federal government in 2011 and deferred paying an additional $1.6 billion.  It paid the majority of its taxes to foreign governments where it operates ($28.8 billion).

#2 Chevron (CVX)

Pre-tax earnings: $47.6 Billion

Tax Provision: $20.6 Billion (43%)

Actual Taxes Paid to U.S. federal government: $1.9 Billion (4%)

Chevron paid $1.9 billion to the U.S. federal government in 2011 and deferred paying an additional $877 million.  It paid the majority of its taxes to foreign governments where it operates ($16.5 billion).  Chevron also paid $596 million to state and local government.

 

#3 Apple (AAPL)

Pre-tax earnings: $34.2 Billion

Tax Provision: $8.3 Billion (24%)

Actual Taxes Paid to U.S. federal government: $3.9 Billion (11%)

Apple paid $3.9 billion to the U.S. federal government in 2011 and deferred paying an additional $3.0 billion.  It paid $762 million to state and local government, $769 million to foreign governments.

 

#4 Microsoft (MSFT)

Pre-tax earnings: $28.1 Billion

Tax Provision: $4.9 Billion (18%)

Actual Taxes Paid to U.S. federal government: $3.1 Billion (11%)

Microsoft paid $3.1 billion to the U.S. federal government in 2011.  It paid $209 million to state and local government, $1.6 billion to foreign governments.

 

#5 JPMorgan Chase & Co (JPM)

Pre-tax earnings: $26.7 Billion

Tax Provision: $7.8 Billion (29%)

Actual Taxes Paid to U.S. federal government: $3.7 Billion (14%)

JPMorgan paid $3.7 billion to the U.S. federal government in 2011 and deferred paying an additional $2.1 billion.  It paid $1.2 billion to state and local government, $1.2 billion to foreign governments.

 

#6 Wal-Mart (WMT)

Pre-tax earnings: $24.4 Billion

Tax Provision: $7.9 Billion (33%)

Actual Taxes Paid to U.S. federal government: $4.6 Billion (19%)

Wal-Mart paid $4.6 billion to the U.S. federal government in 2011 and deferred paying an additional $1.4 billion.  It paid $743 million to state and local government, $1.4 billion to foreign governments.

 

#7 Wells Fargo & Co (WFC)

Pre-tax earnings: $23.7 Billion

Tax Provision: $7.4 Billion (31%)

Actual Taxes Paid to U.S. federal government: $3.4 Billion (14%)

Wells Fargo paid $3.4 billion to the U.S. federal government in 2011 and deferred paying an additional $3.1 billion.  It paid $468 million to state and local government, $52 million to foreign governments.

 

#8 ConocoPhillips (COP)

Pre-tax earnings: $23.0 Billion

Tax Provision: $10.5 Billion (46%)

Actual Taxes Paid to U.S. federal government: $1.9 Billion (8%)

ConocoPhillips paid $1.9 billion to the U.S. federal government in 2011 and deferred paying an additional $943 million.  It paid $413 million to state and local government, $7.1 billion to foreign governments.

 

#9 International Business Machines (IBM)

Pre-tax earnings: $21.0 Billion

Tax Provision: $5.1 Billion (25%)

Actual Taxes Paid to U.S. federal government: $0.268 Billion (1%)

IBM paid $268 million to the U.S. federal government in 2011 and deferred paying an additional $909 million.  It paid $429 million to state and local government, $3.2 billion to foreign governments.

 

#10 General Electric (GE)

Pre-tax earnings: $20.1 Billion

Tax Provision: $5.7 Billion (29%)

Actual Taxes Paid to U.S. federal government: $1.0 Billion (5%)

GE paid $1.0 billion to the U.S. federal government in 2011 and deferred paying an additional $1.5 billion.  It paid $4.7 billion to foreign governments.

  • http://www.facebook.com/people/Rick-Stevens/100000737967433 Rick Stevens

    What patriotic companies – supporting our troops at the lowest level they can. But big on wars that other people can fight AND pay for…

    Leona Helmsley: ‘Only little people pay taxes’.

    Hello to you 99%ers ! Hello Suckers.

    • JohnLloydScharf

      Anyone earning over $250,000 raises prices for produces and services to pay for them. All tax rates are a farce. No matter what your income, 25% of the cost of everything you buy goes to the US government.If corporations all paid ZERO taxes, we would see more jobs and be better able to compete foreign labor. Get your head out of the Lebra Tar Pits, fool. IT IS GOVERN SPENDING that causes all of this.

      • http://www.facebook.com/profile.php?id=571235233 Ryan Poirier

        So you think its moral to tax citizens at a higher rate than corporations?

        Corporations aren’t people. They’re now better than people, according to the government.

  • peter

    Kudow and his followers still want lower taxes. The big corps dont want to spend money to be more competitive but just want to hoard. This is the american way. It sucks. Just wait for the next big depression. These are all multinational companies with no loyalty to the united states except to give as much as possible to their lobbys to get their way. There are not enough people hurting yet.

    • jon samuel

      With government sucking the life out of the economy through high taxes and regulations the corporations are sitting tight as they should. There is no incentive for them to invest if the government will just steal the profits from them. we need lower taxes and regulations to unshackle these businesses to take risks. This will grow the economy like the 1980s which spurred a 20 year growth boom. In other words we must throw Obama and his socialist-wannabe’s out of office

      • http://twitter.com/srjones66 Sarah Reese Jones

        It’s like you didn’t read the article. You blame the government for high taxes when the entire article is about how they are not paying the tax rate.

        No incentive to invest if the government will steal from them? You mean, let them get away with paying 1/3 of the tax rate?

        And by the way, if you’re interested in reality, taxes are meant to be collected by our government in order to run our country. I know it’s tough for some folks to understand, but that deficit that gets everyone all upset? It’s from not paying the bills — the 2 wars W left off of the budget, and the tax cuts. See how that doesn’t add up? Hence, a deficit.

        Obama isn’t a socialist, but since that amounts to childish name calling, you’ve just made a right fool of yourself, which isn’t surprising because your entire comment is a cut and paste from Fox News courtesy of Luntz.

  • D Byte

    The recent IRS estimates of cash or equivalents on hand at corporations = $5.1 Trillion.
    Rather than hire, they prepare for the next recession to buy up their stock or competition cheaper. Bain experience is good for something.

  • Monarch

    What you all fail to understand is that the reason these companies pay so little to the U.S. Treasury, is because they choose to do business overseas where the income is sourced and the taxes payable. What they pay to the U.S. Treasury is not relevant. What is relevant is their effective global income tax rate, which based on the information presented above, is between 18% and 46%. This range of effective rates is, contrary to the theme of this piece, significantly higher than the effective individual income tax rates in the U.S. If the U.S. corporate environment was more friendly, you would see the percentage of taxes paid to the U.S. Treasury go up (even as marginal rates are reduced), and taxes paid to foreign governents go down. Don’t be fooled into thinking these corporations don’t pay income taxes. Examine the publicly available information and discern the results for yourself.

    • JoWallet

      Thanks for your great comment Monarch! While it is true that many of these companies with low rates pay taxes to foreign governments, they are still American companies and we believe that the % of their income that gets paid to the U.S. government is relevant. For example, Exxon earned over $40 billion after paying taxes to all governments (including foreign), but only paid the U.S. government $1.5 billion. Some would say that is not enough for an American company to pay to the American government. To provide complete transparency we have provided both the total tax provision (domestic & foreign, current & deferred) as well as the U.S. tax rate paid (domestic, current). Readers can draw their own conclusions.

      • BosTax

        What exactly does “not enough fo an American company to pay to the American government” mean? It sounds like an amorphous standard by someone that doesn’t understand the tax system. Please realize that (1) companies pay what they owe (clearly Exxon has no problem paying their taxes if they pay 42%) and (2) the amount Exxon owes to the US government is a reflection the government’s taxable reach on Exxon’s profits. Oil companies certainly receive tax breaks, but everything here is fair and legal. Not tom ention, corporations are taxed twice. Every dollary paid to shareholders is taxed as a dividend, every dollar paid to employees is taxed at ordinary rates, and there is some taxable side of everyone of the millions or billions of economic transactions that Exxon Mobile creates.
        Context and circumstance is more important than jaw dropping numbers.

        • greendemo

          “Context and circumstance is more important than jaw dropping numbers.”

          Okay, let’s have some context. The Citizens United decision by the thugs on the so-called Supreme Court has allowed corporations to donate money in anonymity. So, corporations buy politicians and expect their whores (i.e., the politicians) to pass tax laws favorable to them. Once this is done, the companies can puff up their commercial chests and claim that are doing everything “fair and legal.”

          Why do the oil companies continue to receive subsidies? If they are paying so little in taxes, are these payments really necessary or are they just another way for politicians to lick Exxon’s boots and give the corporations a refund so they don’t really pay any taxes?

          I’ve seen some Exxon commercials recently which make me want to puke, The commercials begin by decrying the fact that educational standards in the US are so low that we are far down the list in educational achievement with respect to math and science.The commercial concludes by declaring that America needs to do better with respect to education. Exxon is paying so little in tax that they really have no right to complain about anything. And by the way, who just gutted the education industry (along with firefighters and policemen)? The same politicians who serve Exxon (i.e., the Republicans).

          I also have a difficult time with the politicians who claim that companies are competing in an environment that is not competitive. If the US is so difficult, why don’t they move? My guess is that they like their position here and wouldn’t do nearly as well if they re-located their headquarters. They’re just whining to see if they can get some more attention.

          Lastly there has been a movement afoot to have a “tax holiday” so companies can bring home the loot (without paying txes or paying at a lower rate) from offshore accounts. Their promise is that they will invest in the economy and create jobs with the money. The only problem is that we fell for this line of reasoning before and thee oil companies forgot about their promise as soon as they got their money deposited.

          • Dude

            Unions do the exact same thing.
            And when more money has no effect on the quality of the service, wouldnt it make sense to streamline the service and make it more cost efficient (you “gutting” education/firefighters/police).
            When the companies move out, that would hurt revenues for the gov.
            What are you talking about “forgot about their promise?”

          • greendemo

            As far as gutting the firefighters/police and educators, it makes far more sense to me to ask what other countries are doing in their education systems that we are not doing. Also, why has there not been any focus on what parents are doing? Are they enabling children to fail? How many hours a day does a typical parent spend with a child making sure that they are learning what they need to know? Why are we spending so much time teaching to tests? Isn’t it too easy to just blame the teachers rather than looking at the problem a little more carefully? Cutting funding is a very easy answer. I’m not sure it is the best answer or the answer for the problem.

            Yes it would hurt revenues for the government. But since companies are paying so little, I’m not sure it will hurt the government that much.There will be savings such as the reduction in subsidies and some government down-sizing. Besides, these companies are not going anywhere; they just like to whine.

            “Forgot their promise” refers to the companies who were allowed to bring off-shore profits home and then conveniently neglected to follow up by creating more jobs.They got their money and then didn’t do what they said they would. .

      • what

        especially considering that Exxon would be out of business but for the good graces of the American Tax Payers supplying them an over sized Navy to protect shipping lanes (not even taking to account the costs, both in international image and financially of our government propping up dictators, engaging in wars etc, in oil rich nations.)

  • eyebeem1

    Wow. Did they break any laws by doing so?

    • JoWallet

      No laws have been broken. We have provided both tax provision (all taxes, domestic & foreign, current & deferred) and U.S. tax paid (federal, current) in order to provide a complete picture of a company’s tax situation. There are many legitimate reasons a company’s statutory rate, tax provision, and U.S. tax rate paid may differ. Get more information here: http://www.nerdwallet.com/blog/markets/2012/taxes-owed-vs-paid/

  • The Truth

    Biased and misrepresenting article, as always. Chevron and Exxon income is primarily overseas; taxes are paid to foreign governments. A true representation would show US income versus US taxes; not the global income versus US taxes. Maybe the same for other large corporations.

    • JoWallet

      Thanks for your feedback. We provide both tax provision (all taxes, domestic & foreign, current & deferred) and U.S. taxes paid (federal, current) so that users can see both your position and the other side of the argument and draw their own conclusions. For example, Exxon earned over $40 billion after all taxes and paid the U.S. government $1.5 billion. Some would say they have paid more than their fair share due to their taxes to foreign governments while others would say this American company should pay more to the U.S. government. There could even be the argument that corporations should pay no taxes since investment income is taxed on the individual level. We choose to provide both extremes (the 42% rate paid to all governments and the 2% rate paid to the U.S. government) so that users have access to all available information.

    • http://www.facebook.com/profile.php?id=100000656811809 Darryl Crouch

      Not as biased as it seem my friend. Technically, the companies should be bringing all remaining profits after taxation back to their home countries. But they are leaving it offshore. Here is the problem. US foreign policy after WWII was mainly to promote American business and products to other countries. The thought then was that the US would produce and the world would consume. However, due to extreme profit seeking, corporations have turned that model upside down and now produce US brands in foreign countries and sell back to the US, which dwindles the middle class base because jobs were also taken with them and it is the middle class which does most of the US consumer. With the middle class shrinking, eventually there will only be two major classes in the US, rich and poor.

  • A Person with a Brain

    If Joanna had any brain at all, she could go to Exxon’s public filings and see that Exxon paid a nearly 27% tax rate on US earnings. Too bad she a liberal and she’s too lazy to do any work at all.

    • JoWallet

      Hi “A Person with a Brain”. Thanks for your feedback. Exxon earned over $70 billion and paid approximately $30 billion to foreign and domestic governments for a 42% tax rate provision, as we write in the article. The U.S. portion of these taxes was $1.5 billion (2%). Both data points are necessary to understand the complete picture of what this U.S. company pays in total taxes and taxes to the U.S. government.

      Since you asked, my personal point of view (not liberal) is that corporations should not be taxed at all as this inhibits economic growth and these profits are already taxed on the shareholder level. But my job is to provide all sides of the argument, despite my personal beliefs, which is why we did the extra work to cite both tax numbers and allow users to draw their own conclusions.

      • glenbeckisanidiot

        thats a 2% tax rate in the US and a 40% expenditure for doing overseas business. Foreign taxes should be considered immaterial to the corporate rate. Great article!

      • http://www.facebook.com/Click.Beetle Daniel McGown

        I personally think it’s disingenuous to say that corporate earnings are really taxed on the shareholder level. The shareholder’s returns on investment certainly are, sure, but that’s not the same thing by a long stretch. Even then, they are taxed only if realized.

        Consider that if you didn’t tax corporate earnings directly, a person could easily make 100% of their earnings tax free by leaving all of his earnings inside a corporation he controls and conducting all of his financial transactions via the corporation instead of his personal accounts. never removing the assets from the corporation would mean no taxation at all.

        If it were required for corporations to disburse profits to shareholders, then taxing earnings solely through shareholder gains would be workable, but realistically there’s a reason we have evolved the tax system we have.

        • http://www.facebook.com/profile.php?id=100000656811809 Darryl Crouch

          You are correct Daniel. Not all profits go to the shareholders. Companies can funnel profits by two ways, per share appreciation or dividends. But these do not represent total company profits. Market value of shares is normally based on future expectations of company profits, so shares themselves can over and under priced at any given time in market. The unseen hand that is commonly referred to capitalism is nothing more than human emotion.

      • Cuurmudgeon

        And I think that is crap. We’ve had record low taxes and revenue. Where are the jobs? We had higher taxes under Clinton and a better economy. The top income tax rate under Eisenhower was 91% and we built a great infrastructure that is now crumbling.

        • JoWallet

          Thanks for your comment! You are correct that 91% was the top personal income tax rate (corporate taxes were 52%), but my comment actually advocated cutting corporate tax rates in favor of taxing personal income, so it seems we are at least partially in agreement.

          As for jobs, the U.S. currently has the highest corporate tax rate in the world (same 35% as under Clinton) and the data shows that companies have responded to this incentive by moving jobs and taxable profits overseas. I agree with both Obama and Romney that the corporate tax rate should be lowered to make the U.S. a more attractive place to do business and create jobs.

  • clarenceswinney

    Percent ;of GDP
    2000–Revenue 20%–Spending 18%=Surplus
    2009————–15%—————-25%=$1400 Deficit
    In that Time Frame
    Revenue declined 30% and Spend increased 33%=Borrowed $6000B
    Revenue is important!

  • Chiron202

    Since they are are hoarding trillions of dollars, not hiring anyone, and paying only a few percent of their profits to the United States, why not just leave and be done with it? If this is such a lousy country to do business in, then get the hell out.
    I bet I’m not the only one getting sick of hearing poor billionaires whine about their tax problems.

  • mtthwbrnd

    9% of a lot is better than 60% of a little. Why does the government require so much money to “govern” the country anyway?

    • jon samuel

      The democrat’s plan is to pander to the “takers”, get the “takers” to hate the “makers” and convert more than 50% of the country to “takers”. This locks in their power. They are almost there as 49.5% pay no taxes

    • Paul

      Wars and “defense” are expensive when the country has been attempting to outspend the rest of the world combined for military and defense. National defense spending accounts for more than 50% of the federal budget.

  • John

    Correct me if I’m wrong, but it seems that after clicking on the “many reasons” link, that many of the reasons why companies pay substantially lower than the 35%statutory tax rate are actually just tax loopholes. This negates the argument that “well, if we just lowered the tax rate, they would pay would pay the full tax rate,” because if these loopholes still exist, then these large corporations will never pay the 35% (or whatever it is changed too). If you’re a corporation, and you’re allowed all of these loopholes that substantially reduces the amount you pay in taxes, why would the statutory tax rate even matter? If we really want to fix the problem, get rid of the loopholes, so that corporations REALLY do pay the statutory rate.

  • http://www.facebook.com/profile.php?id=100000656811809 Darryl Crouch

    If you look at the taxes they are paying in other countries, and in many cases much more, they are helping to build those countries infrastructure, military, welfare, schools, etc, but they don’t to pay for them here. It’s there choice to pay the taxes where they please, but they should have the decency to stop lobbying politicians to proclaim the US has the highest tax rate when in fact, they have many loopholes and deductions that they use to keep from paying those taxes.