In 2025, 88 profitable American corporations earned a combined $105 billion in pretax profits and paid zero in federal income taxes, according to the Institute on Taxation and Economic Policy. Amazon, Alphabet, Meta, and Tesla alone avoided $51 billion in federal taxes. That same year, the median American household paid roughly 14% of its income to the federal government.
The 25 richest Americans, according to IRS data obtained by ProPublica, paid a true federal tax rate of just 3.4% on wealth gains of $401 billion between 2014 and 2018. Three tax rates. One country. Congress looked at that arrangement and signed the One Big Beautiful Bill Act on July 4, 2025, spending $3.4 trillion to make it permanent.
How the Three-Tier Tax System Works
The gap between billionaire tax rates and worker tax rates is not an accident. It is the product of deliberate policy choices embedded in the U.S. tax code over decades.
Billionaires wealth grows primarily through rising asset prices, stock, real estate, and private equity stakes, none of which is taxable until sold. This unrealized gain can compound for decades, passed down at death with a stepped-up basis that erases the accumulated tax liability entirely. While a teacher's paycheck is taxed at the moment it arrives, a billionaire's $10 billion in stock appreciation sits untouched.
The preferred technique is to borrow against the assets rather than sell them. A $1 billion line of credit backed by stock is not income. The interest payments may be deductible. The stock never gets sold; the gain never gets taxed. ProPublica documented this buy, borrow, die strategy in detail using IRS records, showing that some of Americas wealthiest individuals had borrowed hundreds of millions while reporting minimal taxable income.
Corporations follow a parallel playbook. The most common mechanism is accelerated depreciation, which allows companies to immediately write off capital investments rather than spread them over the useful life of the asset. The 88 zero-tax corporations used this provision to reduce their collective tax bills by $11.4 billion in 2025. The result: companies that are genuinely profitable on paper, and genuinely profitable to their shareholders, pay less than many of their own workers.
At least 88 profitable U.S. corporations paid zero in federal income taxes in 2025, collectively earning more than $105 billion in pretax profits. Instead of paying taxes, they received $4.7 billion in rebates. -- Institute on Taxation and Economic Policy, 2026
The One Big Beautiful Bill: $3.4 Trillion for Whom
The One Big Beautiful Bill Act, signed July 4, 2025, extended and deepened the 2017 Tax Cuts and Jobs Act. The Congressional Budget Office and Joint Committee on Taxation estimated it would add $3.4 trillion to the national deficit over ten years.
The Tax Policy Center found that the top 0.1% of earners, households making $5 million or more, would receive average tax cuts of nearly $300,000 in 2026, about 3.3% of their after-tax income. Households in the bottom 20%, earning up to $34,600 per year, would receive an average benefit of about $150. Roughly $6 of every $10 in tax breaks goes to the top 20% of earners, those making $217,000 or more.
The Center for American Progress calculated the trade-off plainly: $1 trillion in Medicaid cuts and $187 billion in SNAP cuts, offset against $1 trillion in tax cuts for the top 1%. For households earning under $15,000 per year, the law does not just fail to deliver. According to CBO analysis, the net effect raises their tax burden before accounting for Medicaid and SNAP losses at all.
The No Tax on Tips and No Tax on Overtime provisions illustrate the mechanism. Both are structured as deductions, not credits. A worker earning $15,000 per year already pays zero federal income tax due to the standard deduction, so an additional deduction provides no benefit. The provision delivers real savings only to higher-income workers in tipped or overtime-heavy jobs, while nothing new reaches the lowest earners.
What Consistent Rules Would Look Like
If those 88 corporations had paid the statutory 21% rate in 2025, the Treasury would have collected $22.1 billion more in revenue that year alone. Across a decade, that is a sum comparable to fully restoring the SNAP cuts the same Congress passed.
The argument against taxing unrealized gains or closing corporate loopholes is not trivial. Taxing illiquid assets can force unnecessary sales. Aggressive corporate taxes can be offset through transfer pricing, offshoring, and restructuring. The 20th century provides more than one example of economies that went further, nationalizing industries, suppressing profit entirely, and discovering that price signals are hard to replace once you remove them. The verdict on central planning is in.
But the choice in front of the United States is not between free markets and state control. It is between a tax code that applies consistent rules across income types and one that applies different rules depending on whether you earn a paycheck or hold a stock portfolio. A capital gains rate lower than the income tax rate, stepped-up basis at death, and accelerated depreciation for profitable corporations are not features of a neutral market. They are policy choices, renewed every few years by the same Congress that claims the budget cannot afford Medicaid.
Sources
- ProPublica: The Secret IRS Files -- How the Wealthiest Avoid Income Tax
- ITEP: At Least 88 Profitable U.S. Corporations Paid Zero Federal Income Tax in 2025
- ITEP: Four Big Tech Companies Avoid $51 Billion in Taxes Under OBBBA
- Center for American Progress: $1 Trillion in Medicaid Cuts, $1 Trillion in Tax Giveaways for the Richest 1%
- Tax Policy Center: Final House Budget Bill Cuts Average Taxes, Mostly for High-Income Households
- CBS News: GOP Tax Bill Could Cost Low-Income Americans $1,600 Per Year, CBO Says
- Bipartisan Policy Center: What Does the One Big Beautiful Bill Cost?
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