This Is Why We Need State Corporate Tax Disclosure

Chuck Sheketoff

Today our friends at Institute on Taxation and Economic Policy (ITEP) and Citizens for Tax Justice (CTJ) released a report showing that many of the nation’s Fortune 500 companies — including Intel, Oregon’s largest private employer — have paid little or no state income taxes in recent years despite reporting large profits to their shareholders.

The report — Corporate Tax Dodging in the Fifty States, 2008-2010 — which examined corporate filings with the U.S. Securities and Exchange Commission (SEC), calculated the sum of state income taxes paid nationwide by 265 Fortune 500 companies that were profitable each of the three years studied, 2008 through 2010.

Corporate data provided to the SEC did not allow ITEP and CTJ to determine the amounts paid in corporate income taxes to particular states..

Which is why Oregon needs state corporate tax disclosure.

Of the 265 corporations studied, 68 paid no net state income taxes in at least one of the years from 2008 to 2010 — even as these companies together reported making almost $117 billion in pre-tax profits in the years when they paid no taxes.

That group included Intel and 19 other Fortune 500 corporations which, when adding up the past three years, paid no net state income taxes. Although Intel paid state income taxes in one of the three years, it had a negative tax rate in the other two years. The company, which has large manufacturing facilities in Hillsboro, reported to shareholders $23.3 billion in profits during the three-year period.

How did corporations that reported billions of profits to their shareholders at the same time managed to pay nothing or very little in state income taxes? We can image that they relied on a myriad of tax loopholes and accounting gimmicks. But ultimately we don’t know the exact mechanisms by which each corporation shed its responsibilities to help fund the public services which greatly benefit corporations and make for a healthy business climate.

State corporate disclosure would show us which corporations are paying minimal amounts in Oregon income taxes despite reporting big profits, thereby creating the climate for lawmakers to figure out what’s causing the problem.

Which is why Oregon needs state corporate tax disclosure.

The ITEP/CTJ report also revealed a wide range of state income tax rates paid by the profitable corporations, even among corporations in the same industry.

Take banks and the banking industry, for example. Wells Fargo paid state income taxes at a rate of 0.7 percent on $49.7 billion in profits during the three-year period. But another bank, J.P. Morgan Chase, had a combined state income tax rate of 9.1 percent on $32.7 billion in profits during the same period.

State corporate tax disclosure would show whether this disparity in the state income taxes paid nationwide by the banking industry is happening in Oregon.

Which is why Oregon needs state corporate tax disclosure.

Or look at the fast food industry. McDonald’s had a tax rate of 4.8 percent on profits of $8.2 billion, while Yum! Brands (owner of KFC, Pizza Hut and Taco Bell) had a tax rate of minus 0.4 (-0.4) percent on profits of $1.1 billion.

State corporate tax disclosure would show whether corporations that sell burgers pay a higher state income tax rate than those that sell fried chicken, pizza and tacos.

Which is why Oregon needs state corporate tax disclosure.


Oregon Center for Public PolicyChuck Sheketoff is the executive director of the Oregon Center for Public Policy. You can sign up to receive email notification of OCPP materials at www.ocpp.org.

Comments

  • (Show?)

    Chuck,

    Profit reported to shareholders who receive that profit via dividends and, if retained increased value of shares and then guess what? They are taxed on it as income!

    With kind regards,

    Geoff

    • (Show?)

      Geoff, if you don't want corporations to pay any income taxes then that should be a law debated and passed by the legislature. However, today it is a crap shoot as to who has to pay and typically small businesses pay state income taxes and large multinationals like Intel and Nike get special privileges so that they don't pay. I would think that you would not support the current status that puts a thumb on the scale in favor of big business over the entrepreneur.

  • (Show?)

    Suppose you do find out that Intel or some other multi-national in Oregon is only paying $xyz in state income tax.

    How will you determine if this is "their fair share"?

    Suppose you say that Multi-national should pay x% of their global profits. What percentage would be fair?

    How should local investments be treated?

    Each state sets its own method for computing taxes owed. There is little common across the US. Many states also extract their tax revenue via asset and property taxes at varying rates.

    Perhaps the states themselves are satisfied with their current rate of extracting tax revenues from multi-nationals; factoring in the tax revenues on wages and salaries paid by the employees who might not otherwise be employed within the states.

    Some might argue that a token percentage, say 1 or 2% of profits might be the right amount. If adopted by each state, there wouldn't be any profit left at all if all 50 states set the rate at 2%. Is 2% too much? or too little.

    What we all are doing is beating around the bush. Trying to determine a "fair share". Perhaps it is like pornography, and you'll know the answer when you see it.

    Sorry, I don't know what is fair. It's above my pay grade. I do value, though, any company that sets up in Oregon and pays above average salaries and wages. That way everyone benefits in one way or another.

    Just imagine what Oregon tax revenues might be if there were no multi-nationals located here.

open discussion

connect with blueoregon