WASHINGTON Memphis-based International Paper ranks among a group of large corporations whose chief executives earned more in 2010 than the company paid in federal income taxes, according to a report released Wednesday.
The report by the liberal-leaning Institute for Policy Studies found that 25 of the nations 100 highest-paid CEOs representing such large corporations as Coca-Cola, Ford, eBay, General Electric and Verizon took home more than their companies paid in taxes in 2010.
The companies chief executives earned an average $16.7 million, the report found higher than the $10.8 million average for all CEOs in the Standard and Poors 500 index.
While the 25 companies profiled earned average profits of $1.9 billion each, only five paid income taxes last year. On average, each company received tax benefits of $413 million.
International Paper received a federal income tax benefit of $249 million last year, despite earning $198 million in pretax U.S. profits, according to the report. Meanwhile, CEO John Faracis salary increased about six percent to $12.3 million in 2010.
In 2009, the company paid $228 million in federal income taxes.
International Paper spokesman Tom Ryan said the company claimed capital expenditure depreciation and made a $1.15 billion pension contribution in 2010, which significantly reduced our cash tax liability.
The report attributes companies low tax bills to aggressive corporate tax dodging, which it said includes taking advantage of tax credits, offshore tax havens and other loopholes in the tax code.
For International Paper, the report said, those loopholes included renewable energy tax credits for black liquor, a wood byproduct from pulp-making that paper companies have used for decades to generate electricity.
The company received $1.7 billion in cash and an additional $379 million off its tax bill in 2009 from a credit aimed at encouraging companies to mix alternative energy sources with fossil fuels. It reported receiving an additional $40 million tax benefit in 2010 from a credit for cellulosic ethanol, which the Internal Revenue Service ruled could apply to black liquor.
Congress barred black liquor from qualifying for either credit in future years after some lawmakers said the credits dont encourage paper companies to use new fuel sources.'Questionable value'
Ryan said alternative fuel tax credits played a small role in the tax benefit the company received compared to the companys sizable pension contribution.
The reports authors wrote that while not all tax breaks are nefarious, the lions share of tax breaks reward corporate behaviors from offshoring to accelerated depreciation that are of questionable value to society.
The report comes as a newly created super committee of lawmakers gears up to recommend more than $1 trillion in federal deficit cuts over the next 10 years, which could include changes to the tax code.
Some members of Congress and business leaders are pushing for an overhaul of tax policy, and the Obama administration has said it will consider lowering the corporate tax rate if Congress agrees to end enough loopholes and tax breaks to pay for it.
William McBride, an economist at the Tax Foundation, said the problem isnt corporate behavior, but rather the nations complicated, loophole-ridden tax code.
This is not about illegality or tax evasion, this is legal tax avoidance, he said. A lot of these loopholes were put in the tax code precisely because (lawmakers) expect companies to respond to them, to change their behavior, do things like put solar panels on the roof or hire veterans... so its kind of ironic that we then turn around and paint these corporations as evil profit-seekers for doing what the intent of the law was.