CTJ Study Shows Major US Corporations Pay Little In State Taxes

by Leroy Baker, Tax-News.com, New York

04 February 2005

A new analysis of state corporate income tax figures has claimed that America’s largest 250 corporations have managed to reduce their state income tax contributions to around one-third of the actual average state corporate tax rate.

The report, released by the liberal-leaning think tank, Citizens for Tax Justice (in association with the Institute on Taxation and Economic Policy) is a follow-up to a September 2004 study of the federal income taxes paid by 275 Fortune 500 corporations, of which 252 disclosed their state and local income tax payments.

According to the CTJ study, by 2003, these 252 companies had reduced their state income tax payments to an average of 2.3% of their US profits, which compares to an average statutory state corporate tax rate of around 6.8%, resulting in a decline in the total contribution of state corporate income taxes to the economy of almost 40% since 1989.

The study claimed that 71 of the 252 companies managed to pay no state income tax at all in at least one year from 2001 through 2003, while 25 of the firms enjoyed multiple no-tax years. In addition, 35 companies paid no state income tax in 2003, and another 138 paid less than half the statutory state corporate tax rate in the same year.

At a state corporate tax rate rate of 6.8%, the CTJ calculated that the 252 corporations would have paid $67.1 billion in state corporate income taxes over the 2001-03 period on the $1 trillion in U.S. profits that they reported. In reality, the firms paid $25.4 billion in state income taxes, the report stated.

Condemning the findings, Robert S. McIntyre, director of Citizens for Tax Justice and author of the study observed that: “The data in our report show in stark terms just how successful large, corporations have become at shirking their tax responsibilities to state and local governments.”

He went on to add that: “As a result, individual taxpayers and purely in-state (usually smaller) businesses are paying a heavy price, in the form of higher taxes, reduced public services and unfair competition.”

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