Delta earned over $5 billion in pre-tax profit in 2018 and did not pay a dime in federal income tax. And that’s exactly how the program is supposed to work according to Delta’s CEO.
Kai Ryssdal: With Delta doing so well, I’m sure you’ve seen the stories in the paper the last couple of days about corporate taxes and how much tax companies are paying. Delta is not paying a lot. Is that right, do you think?
Bastian: Absolutely. We’re following the tax code. Delta, as you recall, lost a lot of money. We lost almost $20 billion post-9/11. We went through some very difficult economies over the last 20 years. And so, what we’re doing is we’re able to offset the losses of those years against the profits of today. We have probably only have about another year or so left in those losses, and then at that point then we should start being a cash taxpayer once again. But, you know, these are hard-earned losses, I would say, that we utilize, and our people had real pain attached to them. I am proud that we’ve got the best profit-sharing plan in corporate America for our employees. They get 15% of the profits of the company; $1.3 billion we paid last year, so yeah, I think we’re doing our share.
Sounds reasonable enough, right? Delta lost billions and the U.S. tax code allows Delta to slowly offset that loss against future gains. Under this policy, Delta has not paid federal taxes since 2011.
But it’s more than just offsetting old losses. Per the Institute on Taxation and Economic Policy,
Delta Airlines…used accelerated depreciation, a tax break that allows companies to write off the cost of their capital investments much faster than these investments wear out, to dramatically reduce their tax rates.
The goal behind accelerated depreciation is to encourage business investment. You could look at LAX’s massive $2BN investment as the fruit of that tax advantage. Under the 2017 Tax Cuts and Jobs Act, corporations can deduct the entire cost of a capital investment during the first year. That essentially discounts investment, making it more attractive.
It is interesting to me that Delta was able to shift its pilot pension obligations to the Pension Benefit Guaranty Corporation (PBGC) while under bankruptcy protection, but now reaps the gains of its years of losses post 9/11 and during the Great Recession. While the general concept of offsetting losses is a critical and positive function of U.S. tax code, if Delta wants to be a good corporate citizen I hope it will use its profits to pay pilots what it promised instead of shifting that burden onto the wider net of the PBGC. The same goes for American and United.