April 18, 2012 -- intro: The eight companies that spent the most on lobbying happened to have a lower corporate tax rate, a report released this week from the Sunlight Foundation found.
The Sunlight Foundation, a watchdog group advocating for government transparency, analyzed the 200 largest U.S. companies, ranked by 2010 pre-tax income, and found those that spent the most on lobbying between 2007 and 2009 had lower 2010 tax rates than what they paid in 2007. Some of the companies say their tax rates have little to do with their lobbying efforts though.
The average corporate tax rate fell, after all, to 29.3 percent in 2010, compared to 29.9 percent in 2007, a period which included many companies struggling to recover during the financial crisis.
Lee Drutman, senior fellow at the Sunlight Foundation, acknowledged that the lower tax rates are not entirely driven by lobbying, but the "correlation is strong."
Drutman analyzed the reported tax rates described in company financial statements.
"Certainly, there are a variety of reasons why corporations pay the taxes that they do from year to year, some of which are no doubt idiosyncratic. But for this pattern to occur entirely by chance is statistically unlikely, though possible," he said. "These corporations all report substantial lobbying on tax issues, and if it's having no effect on their effective tax rates, then they might wish to explain to their shareholders why they are wasting their money."
Here's the list of the companies that paid the most in lobbying from 2007 to 2009, based on data from the Senate's Office of Public Records, and the change in their tax rates:
quicklist: category: Lobbying: $81.92 million; Estimated tax reduction: -$565.32 million title: ExxonMobil text:
The Sunlight Foundation reported energy giant ExxonMobil had a 1.1 percent decline in its reported tax rate when it dropped to 40.7 percent from 41.8 percent from 2007 to 2010. As one of the biggest companies in the world ranked by market capitalization, ExxonMobil paid about $565.3 million less because of a lower tax rate.
A spokesman for the company declined to comment on the list but pointed out that the company is one of the largest taxpayers in the country.
Over the past five years, ExxonMobil's total U.S. tax expense was $57 billion, which is $18 billion more than the company earned in the United States during the same period. In 2011, ExxonMobil's U.S. tax expenses totaled more than $1 billion a month on average, which is more than $12 billion in U.S. taxes in 2011 at all levels and types, he said.
quicklist: category: Lobbying: $77.58 million; Estimated tax reduction: -$1,005.51 million title: Verizon Communications text:
Verizon Communications had a 7.9 percent decline in its tax rate, which dropped to 19.4 percent from 27.4 percent from 2007 to 2010, the foundation reported.
But Bob Varettoni, spokesman for Verizon, said the study "is in error about Verizon's tax rate, and any lobbying we may have done had no influence on our tax rate."
Verizon paid nearly $4 billion in income, employment and property taxes last year. "We comply with all tax laws and pay our fair share of taxes," he said.
He said the 19.4 percent tax rate quoted for 2010, as discussed in Verizon's quarterly 10-K filing with the SEC, includes taxes from UK-based Vodafone. Vodafone, which owns 45 percent of Verizon Wireless, must pay on 45 percent of the income generated by Verizon Wireless. If the study was focused only on Verizon's federal tax rate for Verizon's share of income, Verizon's federal estimated tax rate for 2010 would be 32.1 percent, not 19.4 percent, Varettoni said.
quicklist: category: Lobbying: $73.17 million; Estimated tax reduction: -$1,082.70 million title: General Electric text:
General Electric's reported tax rate declined 7.6 percent to 7.4 percent in 2010 from 15 percent in 2007, the Sunlight Foundation reported.
Andrew Williams, spokesman for General Electric, said the report "draws a false conclusion," in part because GE's worldwide tax rates from 2008 to 2010 were "unusually low due to the financial crisis."
Williams said GE's global rate was 29 percent in 2011, up from 7 percent in 2010. He said the rate is below the typical 35 percent corporate tax rate because of lower tax rates on foreign earnings, and tax credits and deductions for investments that support U.S. economic growth and jobs. He added that since 2009, GE has added 13,800 new US jobs and is building 16 new plants in the US in addition to the 231 manufacturing plants located in 39 states.
"GE's lobbying expenses were higher during this period primarily because of GE's very public advocacy for a competitive engine for the Joint Strike Fighter, an engine that according to the General Accounting Office would have saved American taxpayers $20 billion," Williams said. "GE has an obligation to shareholders and employees to ensure that it is heard on issues considered by Congress that impact its diverse portfolio of businesses."
quicklist: category: Lobbying: $70.96 million; Estimated tax reduction: -$7,359.95 million title: AT&T text:
Telecommunications company AT&T had a reported tax rate of -6.4 percent in 2010, down 40.4 percent from its 2007 rate of 34 percent, the foundation reported. AT&T did not immediately return a request for comment.
quicklist: category: Lobbying: $63.31 million; Estimated tax reduction: -$160.66 million title: Altria text:
The reported tax rate for tobacco company Altria fell 1.6 percent for the period between 2007 and 2010. The company's rate was 27.4 percent in 2010 and 28.9 percent in 2007.
A spokesman for the company, based in Virginia, said the study "incorrectly states Altria's reported tax rate in 2007 and 2010."
David Sutton, spokesman, said, "as included in our published annual reports," Altria's reported tax rate for 2007 was 31.5 percent, not 28.9 percent and that Altria's 2010 reported tax rate was 31.7 percent, not 27.4 percent.
quicklist: category: Lobbying: $58.33 million; Estimated tax reduction: -$377.16 million title: Amgen text:
Biotech company Amgen had a tax rate of 13 percent in 2010, down 7.1 percent from its rate in 2007 of 20.1 percent, the foundation reported. Amgen, which calls itself the world's largest independent biotechnology firm, is based in Thousand Oaks, Calif.
A spokeswoman for the company declined to comment.
quicklist: category: Lobbying: $57.56 million; Estimated tax reduction: -$296.08 million title: Northrop Grumman text:
The reported tax rate for defense company Northrop Grumman, based in Falls Church, Va., dropped 11.4 percent to 21.5 percent in 2010, down from 32.9 percent in 2007. Brandon Belote, spokesman for the company said, "As a matter of policy, we don't comment on specific activities in which we are involved however Northrop Grumman fully complies with all regulations regarding disclosure of expenditures in this area."
quicklist: category: Lobbying: $56.99 million; Estimated tax reduction: -$321.5 million title: Boeing text:
Aerospace manufacturer Boeing, based in Chicago, had a tax rate of 26.5 percent in 2010, down 7.1 percent from the 33.7 percent rate in 2007.
Chaz Bickers, Boeing's communications director, said Boeing's 2010 tax expense was $1.2 billion, which was reduced by research and development tax credits and a federal audit settlement of $371 million for the 1998-2003 period.
He said Boeing earns the "overwhelming majority" of its revenue in the U.S., pays its associated taxes here and Boeing's business has "a long cycle requiring significant periods of investment."
"During the past three years, we've made substantial investment in our U.S. manufacturing capacity, the retirement security of our employees (funding our pension plans), and in the development of new products. These activities are strongly supported and incentivized by U.S. tax laws to help stimulate the economy and create and sustain U.S. jobs," he said. "The bottom line is that Boeing is following rules that encourage jobs, growth and retirement security. That's what we're supposed to do and that's one of the drivers that helped Boeing create 11,000 new, high-quality American jobs last year."