Last week, the Trump administration laid out its plans for tax reform at a White House briefing by Secretary of the Treasury Steven Mnuchin and Director of the National Economic Council Gary Cohn. The proposal includes sharp reductions in individual and corporate income taxes and aims to simplify the tax code.
At 35 percent, the U.S. corporate income tax rate is significantly higher than it is in most other countries, causing many U.S. companies to park their foreign earnings overseas, where they are taxed at a lower rate. President Trump plans to cut the corporate tax rate to 15 percent in an attempt to bring back that money and boost investment domestically.
As our chart illustrates, the largest U.S. tech companies currently pay an effective tax rate that is significantly lower than the statutory rate of 35 percent but (in most cases) higher than the proposed rate of 15 percent. Take Apple for example: the world’s most profitable company paid $15.7 billion in income taxes in the past fiscal year, $13.5 billion in the U.S. and $2.1 billion abroad. The company’s effective tax rate was 26.6 percent. Had it been 15 percent, Apple would have saved more than $6 billion in taxes.
This chart shows the effective tax rate paid by U.S. tech companies in the latest fiscal year.