Corporate Tax Avoidance Costs States $42 Billion Over Three Years

265 Major, Profitable U.S. Corporations' Tax Avoidance

Costs States $42 Billion Over Three Years; Sixty Eight

Companies Have At Least One Tax-Free Year

Citizens for Tax Justice

December 7, 2011

http://www.ctj.org/corporatetaxdodgers50states/CorporateTaxDodgers50StatesPR.pdf

 

Washington, DC -- A comprehensive new study that

profiles 265 consistently profitable Fortune 500

companies finds that 68 of them 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. These are among the findings in

"Corporate Tax Dodging in the Fifty States, 2008-2010"

released today by the Institute on Taxation and Economic

Policy (ITEP) and Citizens for Tax Justice (CTJ).

 

"Our report shows these 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."

 

Among the 20 corporations who paid zero or less in state

corporate income taxes over the three year period are:

 

Utility provider Pepco Holdings (DC); pharmaceutical

giant Baxter International (IL); chemical maker DuPont

(DE); fast food behemoth Yum Brands (KY); high tech

manufacturer Intel (CA). All 265 corporations,

headquartered in 36 states, are listed in the report at

www.ctj.org/corporatetaxdodgers50states.

 

"Corporate Tax Dodging in the Fifty States, 2008-2010"

concludes that these 265 corporations cost states $42.7

billion in lost revenues in the last three years, and

Gardner identifies three chief causes for state

corporate tax revenues 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 themselves devote their money and

legal firepower to coming up with tax avoidance schemes."

 

The report describes profit shifting and other common

corporate tax avoidance strategies and outlines several

reforms state lawmakers can immediately implement to

ensure profitable corporations doing business in each

state pay closer to the statutory rate, including:

 

      * Implement combined reporting, which

      effectively treats a parent company and its

      subsidiaries as a single corporation for state

      tax purposes. It eliminates most of the

      advantage of shifting profits into Delaware,

      Nevada and other low- or no-tax states.

 

      * Decouple from federal tax loopholes, such as

      bonus depreciation, and other provisions which

      reduce the amount of taxable income corporations

      have to claim in their state tax filings.

 

      * Increase disclosure, transparency and

      accountability. Corporations should be required

      to publicly report their in-state profits, as

      well as any subsidies or loopholes they are

      exploiting each year.

 

"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 the Fifty States, 2008- 2010"

are aggregate for taxes paid to all U.S. states by each

corporation.

 

The newest study is online at

www.ctj.org/corporatetaxdodgers50states.