Fewer Healthy Firms Legally Escape Taxes : Study Attributes Drastic Shrinkage to ’86 Reform

Large corporations that pay little or no taxes are a vanishing species, a report on the 1987 taxes of 250 big companies concluded Thursday.

The study, by Robert S. McIntyre, director of the labor-backed Citizens for Tax Justice organization, is criticized as inaccurate by some of its targets, but such reports have helped stir public support for higher corporate taxes.

As a result of the Tax Reform Act of 1986, the 14 companies that paid the least in taxes from 1981 to 1985--they received rebates totaling $1.8 billion--paid more than $3 billion in taxes last year, McIntyre said. Only 16 corporations were reported as paying zero taxes last year, compared to a previous low of 34 in 1984 and a high of 72 in 1982. Such previously low-tax industries as defense contracting, airlines and chemicals saw their tax bills rise significantly. The return to taxpaying status also drove up tax payments for business as a whole: Where the 250 public corporations surveyed paid taxes on only 14.9% of their profits from 1981 to 1985, in 1987 the percentage averaged 22.1%.

However, the study reported, some profitable companies still managed to sharply reduce their tax bills last year through the use of legal loopholes. Such firms as General Motors Corp., IBM Corp. and Aetna Life & Casualty not only paid no taxes in 1987, they received substantial refunds because of the use of deductions from earlier years and other factors, according to McIntyre’s report. Both GM and IBM lobbied hard for the 1986 tax act.

Those companies, among others, sharply disputed the study’s results Thursday. Some contended McIntyre had made mathematical or technical errors and that their taxes actually were higher. Others said they were merely using provisions of the tax code to postpone the payment of taxes.

“Contrary to reports, GM paid $73 million in federal taxes last year,” said spokesman John Hartnett. Heavy investment, which increases deductions, helped drive down the company’s tax bill, he said, but added that GM “expects to pay more taxes as a result of the 1986 tax reform act, which we supported.”

Marti Easterbrook, an IBM spokeswoman, declined to give a specific figure, but said the report was inaccurate in saying IBM received a refund of $123.5 million, adding that the firm had paid “many millions of dollars in taxes.” Spokesmen for Aetna and Hewlett-Packard Co., among others, also disputed McIntyre’s figures.

TAXES AT ISSUE

Citizens for Tax Justice claims these highly profitable public firms paid no federal income tax in 1987. Some of the companies denied the report.

COMPANY...1987 PROFIT IN MILLIONS

IBM...$2,930

GM...2,400

Aetna Life...1,010

Goodyear Tire...573.7

Carolina Power...536.3

Hewlett-Packard...405

Consumers Power...384.3

Illinois Power...344.5

Gulf State Utilities...273.2

Baxter Travenol...233.6

Ashland Oil...158.5

Corning...122.6

Pennzoil...76.8

Greyhound...62.

Ogden...55.7

Sequa Corp....42.3

Source: Citizens for Tax Justice