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.

Chuck 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.

By Chuck Sheketoff Dec. 07, 2011 Posted in open discussion.