New report shows 265 major, profitable U.S. corporations’ tax avoidance costs states billions
RALEIGH (December 7, 2011) – A comprehensive new study profiling 265 consistently profitable Fortune 500 companies finds that multiple North Carolina-based companies have been able to sharply reduce their state corporate income tax bills, often reducing them to zero, or less, in profitable years, likely costing North Carolina millions.
“Corporate Tax Dodging in the Fifty States, 2008-2010” was released this morning by the Institute on Taxation and Economic Policy (ITEP) and Citizens for Tax Justice (CTJ) in conjunction with the North Carolina Budget & Tax Center. The report finds a total of 68 companies that paid no state corporate income tax in at least one of the last three years and 20 of them averaged a tax rate of zero or less during the 2008-2010 period.
"Our report shows these 265 corporations raked in a combined $1.33 trillion in profits in the last three years, and far too many have managed to shelter half or more of their profits from state taxes,” said Matthew Gardner, Executive Director at the Institute on Taxation and Economic Policy and the report’s co-author. “They’re so busy avoiding taxes, it’s no wonder they’re not creating any new jobs.
The report also concludes that these corporations cost states $42.7 billion in lost revenues in the last three years, and Gardner identifies three chief causes state corporate tax revenues have been steadily declining for two decades. First, state lawmakers continue to enact tax subsidies requested by corporations, most of which don’t produce the promised economic results. Second, federal tax breaks enacted in the past decade further reduce state corporate income tax revenues since states generally accept corporations’ federal tax numbers. Third, said Gardner, "and most insidious, is that multi-state corporations devote their money and legal firepower to coming up with tax avoidance schemes."
At the time of the release of the report, North Carolina lawmakers gathered for the Revenue Laws Study Committee meeting where they are considering new legislation that would make it even easier for multi-state corporations to avoid paying taxes.
"Instead of opening the door to even more corporate tax avoidance, lawmakers should enact clear rules that ensure all companies contribute to the schools, roads and quality of life that are critical to a strong economy,” said Edwin McLenaghan, an analyst with the NC Budget and Tax Center. “A policy known as mandatory combined reporting can deliver certainty to businesses and help ensure adequate public investments, which ultimately will support a strong business climate.”
In North Carolina, Goodrich was the sole company with a negative tax rate over the past three years, but six of the 11 profitable Fortune 500 companies headquartered in North Carolina paid tax rates below 4 percent of the profits they earned from 2008-2010.
“Corporate Tax Dodging in the Fifty States, 2008-2010” follows up on “Corporate Taxpayers and Corporate Tax Dodgers, 2008-2010” which was published in November by Citizens for Tax Justice (CTJ) and the Institute on Taxation and Economic Policy (ITEP). The two groups released their first major study on the federal income taxes that large, profitable American corporations pay on their U.S. pretax profits in 1984. Because few states have transparency regarding business taxes, it is not possible to determine specific tax amounts paid by corporations to individual states; all figures in “Corporate Tax Dodging in Fifty States, 2008-2010” are aggregate for taxes paid to all U.S. states by each corporation.
You can find the complete study online here.
FOR MORE INFORMATION CONTACT: Alexandra Forter Sirota, email@example.com, 919.861.1468; Jeff Shaw, Director of Communications, NC Justice Center, firstname.lastname@example.org, 503.551.3615 (cell).
The N.C. Budget and Tax Center—a project of the N.C. Justice Center—seeks to create economic opportunity and shared prosperity for all North Carolinians through non-partisan research, education and advocacy on budget, tax and economic issues.