The Tax Cuts and Jobs Act of 2017 was the most significant change in the U.S. tax code since Ronald Reagan’s Tax Cuts and Jobs Act of 1986. The legislation cut the federal corporate income tax rate from 35 percent to 21 percent.

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Without question, some sort of corporate tax reform was needed because, for decades, it had been ridiculously complicated and inefficient, and had incentivized corporations to borrow too much money, leave money in overseas subsidiaries, and/or potentially move operations overseas altogether. Plus, the statutory tax rate was much higher than in other Organization for Economic Cooperation and Development (OECD) economies. < Note: Even though the statutory tax rate was higher on paper, relentless lobbying efforts, complex deductions, and loopholes brought the effective marginal tax rate closer to our international competition, but that only caused even greater confusion and inconsistency. >

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Although we needed corporate reform, the 2017 Republican bill went way too far. Analysis by The New York Times discovered that “in the 2017 fiscal year, FedEx owed more than $1.5 billion in taxes. The next year, it owed nothing... FedEx reaped big savings (from the tax cut), bringing its effective tax rate from 34 percent in fiscal year 2017 to less than zero in fiscal year 2018, meaning that, overall, the government technically owed it money.”

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This is probably not as bad as it sounds, because surely FedEx expanded payroll and increased investment in new equipment and other assets in the years after its big windfall (or, as Alan Graf, FedEx’s chief financial officer, called it, a “mighty fine Christmas gift”), right!?!

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Nope. Remember when we said that, instead of increasing wages or making investments after the tax cut, many corporations bought back their own shares – which only benefits shareholders and executives? Well, that’s pretty much what FedEx did. “The company spent less in the 2018 fiscal year than it had projected in December 2017, before the tax law passed. It spent even less in 2019. Much of its savings has gone to reward shareholders: FedEx spent more than $2 billion on stock buybacks and dividend increases in the 2019 fiscal year, up from $1.6 billion in 2018, and more than double the amount the company spent on buybacks and dividends in fiscal year 2017.”​ In fact,

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The New York Times analysis of data compiled by Capital IQ shows no statistically meaningful relationship between the size of the tax cut that companies and industries received and the investments they made. If anything, the companies that received the biggest tax cuts increased their capital investment by less, on average, than companies that got smaller cuts. FedEx’s use of its tax savings is representative of corporate America. [As of November 2019,] companies had already saved upward of $100 billion more on their taxes than analysts predicted when the law was passed.

 

Companies that make up the S&P 500 index had an average effective tax rate of 18.1 percent in 2018, down from 25.9 percent in 2016, according to an analysis of securities filings. More than 200 of those companies saw their effective tax rates fall by 10 points or more. Nearly three dozen, including FedEx, saw their tax rates fall to zero or reported that tax authorities owed them money. From the first quarter of 2018, when the law fully took effect, companies have spent nearly three times as much on additional dividends and stock buybacks, which boost a company’s stock price and market value than on increased investment.

​​​​​​​​​​​​​​​A study by the Institute on Taxation and Economic Policy revealed that, in 2020, 55 corporations had zero federal tax liability on over $40 billion in profits. Zero. These companies included Nike, Dish Network, and FedEx. Not only did these companies not have to pay federal income taxes, but they received tax rebates of $3.5 billion, giving them an effective tax rate of roughly negative 9 percent. As of April 2021, twenty-six of these companies had paid zero federal income tax on over $77 billion in profits since the Republican tax cut. Yet they had received almost $5 billion in rebates, making their effective three-year tax rate negative 6 percent.

 

In February 2024, the Institute on Taxation and Economic Policy said this: “The tax overhaul signed into law by then President Donald Trump in 2017 cut the federal corporate income tax rate from 35 percent to 21 percent, but during the first five years it has been in effect, most profitable corporations paid considerably less than that. This is mainly due to loopholes and special breaks that the 2017 tax law left in place and, in some cases, introduced. Corporate tax avoidance occurs because Congress allows it to occur, and the Trump tax law in many ways made it worse.” Here’s what they found in their analysis: