Post Analysis of Dow 30 Firms Shows Declining Tax Burden as a Share of Profits
Procter & Gamble, the Cincinnati-based company behind Pampers diapers and Tide detergent, reported a federal tax burden in 1969 that was 40 percent of its total profits, a typical rate in those days.
More than four decades later, P&G is a very different company, with operations that span the globe. It also reports paying a very different portion of its profits in federal taxes: 15 percent.
The world’s biggest maker of consumer products isn’t the only one. Most of the 30 companies listed on the country’s most famous stock index, the Dow Jones industrial average, have seen a dramatically smaller percentage of their profits go to U.S. coffers over time, even as their share prices have driven the Dow to an all-time high.
A Washington Post analysis of data from S&P Capital IQ, a research firm, found that in the late 1960s and early 1970s, companies listed on the current Dow 30 routinely cited U.S. federal tax expenses that were 25 to 50 percent of their worldwide profits. Now, most are reporting less than half that share.
The reason is not simply a few loopholes tucked deep in the tax code. It’s far bigger: the slow but steady transformation of the American multinational after years of globalization. Companies now have an unprecedented ability to move their capital around the world, and the corporate tax code has not kept up with the changes.
Just the opposite, in fact. Experts say the U.S. code has encouraged companies to shift their income overseas, where it is more lightly taxed by the U.S. government. Many firms, in turn, have discovered that just as they can move their manufacturing to other parts of the world, so, too, can they shift their income to far-flung tax havens such as the Cayman Islands.
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