President Biden made several references to tax-related issues in the 2023 State of the Union this week. Let’s look at a few of the items.

One of his most referenced topics, even before the speech, is the issue of corporate tax in America. He has repeatedly used a statistic that claims that 55 of the biggest companies in America, the Fortune 500, made $40 billion in profits in 2020 and paid zero in federal income taxes. Ever wonder how he knows this? Let’s look.

This number, according to a report by the Institute on Taxation and Economic Policy, was based on the study of corporate reports submitted to the Securities and Exchange Commission of companies listed in the Fortune 500. The report found that 55 profitable companies indicated that they paid no federal income tax, despite earning almost $40.5 billion in pretax income in 2020. However, it is important to note that the number is an estimate based on research and analysis of public information and company tax returns are generally not made public.

In addition to this, President Biden mentioned the Inflation Reduction Act, which includes a new 15 percent corporate minimum tax on large corporations with an average financial statement income of over $1 billion. The Committee for a Responsible Federal Budget Tax Foundation estimated that this new tax would raise $313 billion over 10 years though other organizations have put it as little as $153 billion. There have also been reports that the average effective tax rate under the corporate income tax would rise from 18.7 percent to 19.3 percent.

President Biden also proposed a billionaire minimum tax and compared the tax rate of billionaires to that of schoolteachers and firefighters. The President’s proposal is aimed at ensuring that no billionaire pays a lower tax rate than a schoolteacher or a firefighter. However, it’s important to note that the estimate of the effective tax rate of the 400 wealthiest taxpayers at 8 percent, mentioned in a White House study, included unrealized gains in the income calculation. According to the IRS, the average tax rate for the top 1,475 taxpayers with an adjusted gross income of at least $77 million was 23.7 percent, while the top 1 percent of taxpayers paid an effective tax rate of nearly 26 percent.

Overall, President Biden’s statements regarding corporate taxes and billionaire minimum taxes reflect the government’s efforts to address tax-related issues. It is evident that there is still work to be done around corporate taxes and we can expect many more changes in tax law in the coming year.