Report reinforces corporate tax reform is needed, leader says

April is tax time. It’s also a month when many state legislatures are in the midst of their most heated budget and policy discussions. The combination of the two, along with a new report showing just how little corporations pay in income taxes, presents a ripe opportunity for AFT Public Employees activists to turn up the heat on their elected officials for corporate tax reform.

Two-thirds of the profits of 252 Fortune 500 corporations escaped state taxes entirely in 2003, according to a February 2005 report by Citizens for Tax Justice (CTJ) and the Institute on Taxation and Economic Policy (ITEP).

“A shocking 71 of the 252 companies managed to pay no state income tax at all in at least one year from 2001 through 2003,” according to the report. “Twenty-five of these companies enjoyed multiple no-tax years,” including Avon, Sears, Toys “R” Us, AT&T, Boeing, Eli Lilly, Merrill Lynch and Metlife.

“By 2003, these 252 companies had slashed their state income tax payments to only 2.3 percent of their U.S. profits,” according to the report, which notes that “the average statutory state corporate tax rate is about 6.8 percent.

“If these 252 corporations had paid the 6.8 percent average state corporate tax rate on the almost $1 trillion in U.S. profits that they reported to their shareholders, they would have paid $67.1 billion in state corporate income taxes over the 2001-03 period. Instead, they paid only $25.4 billion.”

AFT Public Employees welcomes the report, which is one more piece of solid evidence that corporate tax reform is needed. “Over the years, the continuous decline in taxes paid by corporations has put a serious strain on resources necessary for maintaining quality public services,” says Jim McGarvey, an AFT vice president and chair of the AFT Public Employees program and policy council. “While businesses have demanded the lower rates to ‘create jobs,’ that promise falls short. Businesses and communities must have reliable services and a well-maintained infrastructure in order to prosper.”

The report, written by CTJ director Robert S. McIntyre and ITEP’s T.D. Coo Nguyen,  is available at www.ctj.org. It is a continuation of their investigation into the amount of federal income taxes paid on U.S. profits by 275 large and profitable corporations over the
2001-03 period. The state tax study is limited to the 252 corporations that fully disclosed their state and local income tax payments.

The report includes explanations of various loopholes, legislated tax incentives and tax-avoidance strategies that companies use to lower their tax bill—if not eliminate it.