A coalition of progressive lawmakers is ramping up pressure on Congress to reform the U.S. tax code, following reports that 35 major corporations paid their executives more in compensation than they paid in federal income taxes over the last five years. Led by Senators Elizabeth Warren (D-Mass.), Sheldon Whitehouse (D-R.I.), and Representative Greg Casar (D-Texas), the group is demanding that Congress take action in 2025 to correct what they describe as gross inequities in the tax system that favor the wealthiest individuals and corporations.
“For decades, big businesses and the wealthy have skirted their responsibility to pay federal income taxes, leaving hardworking Americans to foot the bill,” the lawmakers wrote in a letter to the companies. “As Congress considers what to do when some provisions of the 2017 law expire next year, it is critical that we ensure that large, profitable businesses are paying their fair share.”
At the heart of the lawmakers’ critique is the 2017 Tax Cuts and Jobs Act (TCJA), signed into law by then-President Donald Trump. The act reduced the corporate tax rate from 35% to 21%, resulting in significant savings for large corporations. But according to the lawmakers, the promised benefits of the tax cuts never trickled down to workers. Instead, the tax savings were used to line the pockets of top executives.
From 2018 to 2022, the 35 companies collectively earned $277 billion in domestic profits while paying an average effective tax rate of just 14.1%—significantly lower than the statutory rate of 21%. Rather than investing in their workforce or paying their fair share of taxes, these companies funneled $9.5 billion to their top executives. In contrast, the majority of workers at these companies saw no substantial wage increases, highlighting the deepening income inequality exacerbated by the TCJA.
Tesla, one of the companies named in the lawmakers’ letter, stands out as a particularly egregious example. Between 2018 and 2022, Tesla earned $4.4 billion in profits but paid no federal income taxes. During that same period, Tesla CEO Elon Musk received what has been called the largest pay package in history, further amplifying the disparity between executive compensation and tax contributions. The lawmakers noted that Tesla’s case exemplifies how the TCJA has disproportionately benefited the wealthy at the expense of working Americans.
The analysis by the Institute for Policy Studies and Americans for Tax Fairness, which the lawmakers cite in their letters, reveals that these companies used their tax savings to reward executives with astronomical pay packages rather than investing in their employees or communities. Executives at the 35 companies made an average of $989,000 per year, with an average raise of $50,000, while 90% of their workers saw no increase in earnings.
The 35 companies named in the report include well-known corporations like T-Mobile, Netflix, AIG, Ford, NextEra, and Duke Energy. These companies, which made billions in profits, paid less in taxes than they did in compensation to their top executives, a stark contrast to the tax burden faced by average working Americans. The report reveals a fundamental flaw in the U.S. tax system that allows corporations to avoid paying their fair share while enriching their executives.
In their letter, Senators Warren and Whitehouse, and Representative Casar called on the CEOs of these companies to explain how much they would have paid in taxes if not for the TCJA and how much they have spent on lobbying efforts to maintain their favorable tax status. The lawmakers argue that the windfall from the TCJA has allowed these companies to further entrench their financial power while leaving working-class Americans behind.
“The windfall from TCJA to big businesses, executives, and wealthy shareholders is unmistakable,” the lawmakers wrote. “A recent analysis by the Institute on Taxation and Economic Policy found that 342 companies paid an average effective income tax rate of just 14.1% during the five years after TCJA passed, almost a third less than the 21% statutory rate.”
This tax avoidance, the lawmakers argue, has contributed to the growing wealth gap in the U.S. and undermined the ability of the federal government to fund essential services. The letter also points out that many of these corporations have spent millions on stock buybacks, a practice that disproportionately benefits executives and wealthy shareholders rather than workers or the broader economy.
The lawmakers’ demands for tax reform come at a critical time. With the 2024 general election looming, the future of corporate taxation is once again up for debate. While Republicans are pushing to reduce the corporate tax rate even further, from 21% to 15%, progressive lawmakers are calling for a reversal of the TCJA’s tax cuts and a new focus on corporate accountability.
In 2022, President Joe Biden and congressional Democrats passed the Inflation Reduction Act, which included a 15% corporate minimum tax, raising $222 billion from billion-dollar corporations. But the lawmakers argue that more needs to be done to close loopholes and ensure that corporations are held to the same standards as working Americans when it comes to paying taxes.
“Next year, Congress has an opportunity to take bigger strides in reforming our tax code—to raise the corporate rate, close loopholes, and hold big businesses to the same standards as everyday working Americans who pay their fair share,” the lawmakers wrote.
“Congress continues to say they are concerned about the country’s deficit,” said Mahyar Sorour, director of beyond fossil fuels policy at the Sierra Club, which supports the tax reform effort. “Ending handouts to billion-dollar corporations that price gouge consumers and pollute our environment is a great way to reduce spending.”
COMMENTS