Some Even Get Refunds; Reagan Legislation Blamed : Lobby Cites Profitable Firms That Pay No U.S. Taxes

Fifty major U.S. corporations paid no federal income taxes during President Reagan’s first term in office, despite earning nearly $58 billion in profits, and actually received tax refunds totaling $2.4 billion, a labor-backed lobbying group reported Wednesday.

Citizens for Tax Justice, which assembled the list of tax avoiders from a survey of 275 profit-making companies, said also that 79 other corporations escaped paying any federal taxes in at least one of the years between 1981 and 1984.

Tax Deductions, Credits

For last year alone, it said, 40 firms received tax refunds totaling $657 million, despite earning profits of more than $10 billion in 1984--and never paying a penny of taxes on those profits. The refunds were granted because the firms’ tax deductions and credits exceeded their taxable earnings.

Such moves are all legal, and the data offers “a picture of unparalleled success in beating the federal tax collector,” Robert S. McIntyre, the group’s director of federal tax policy, said in a statement.

McIntyre credited that success to the White House’s landmark 1981 tax legislation, which stepped up depreciation rates on corporate equipment and expanded tax credits for investment. The Administration’s newly proposed tax reforms, he charged, “would do nothing to put these corporate freeloaders back on the tax rolls” and would expand depreciation benefits for some firms.

The study, updating a similar report issued last year, analyzes taxation of the largest industrial, service, financial, transportation and utility companies that had recorded profits in each of the last four years.

It concludes that nearly half the 275 firms paid taxes equivalent to 12% or less of their profits during Reagan’s first term, compared to the corporate tax rate of 46% before deductions and credits on profits above $100,000. The group said 12% is the effective average tax rate on individuals.

Boeing Corp., the Seattle aerospace firm, was dubbed the leading tax avoider in the last four years, earning profits of $2 billion and receiving federal income tax refunds totaling $285 million. AT&T; alone received a $242-million tax refund in 1984 despite earning profits of $1.9 billion.

Six Other Companies

During the 1981-84 period, six companies besides Boeing--Dow Chemical, ITT, Tenneco, Santa Fe Southern Pacific, Pepsico and General Dynamics--consistently earned profits but received federal tax refunds exceeding $100 million.

All told, the report contended, the 129 companies that escaped taxation at least once since 1981 had $66.5 billion in pre-tax domestic profits in the last four years and received tax refunds totaling $6.4 billion--a tax rate of minus 9.6%.

Had all 275 companies in the survey paid the full 46% tax rate instead of taking deductions and credits to escape some taxation, the report stated, federal coffers would have received an extra $124 billion during the four years.

A Boeing spokesman said Wednesday that the firm had legally avoided federal taxes but called the lobbying group’s estimates “excessively high.” Dow said that the study ignores sales taxes and other levies and said the firm has paid $3.1 billion in various taxes since 1973.

Argues for Reform

The fruits of corporate tax avoidance, McIntyre said, were all legal and were often reaped through new or expanded tax loopholes created in the 1981 tax legislation. In arguing for reforms, McIntyre contended Wednesday that some of the tax breaks did not produce the hoped-for economic effects. Despite tax credits for investment, he said, spending for new factories and equipment rose at only a 3% annual pace during Reagan’s first term, less than half the rate in the previous four years.

Tax-loophole money has gone instead to take over corporations, buy stock and pay stock dividends, he said.