Salt Lake Tribune: Corporate tax-dodging hurts state tax revenue
media mentionBy Cathy Mckitrick
The Salt Lake Tribune
First published Dec 08 2011 07:33AM
Updated Dec 9, 2011 11:33PM
A new study takes aim at tax-dodging corporations, some with operations in Utah, revealing that from 2008 to 2010, 68 Fortune 500 companies managed to avoid paying any state income tax for one or more of those three years.
The nonprofit Institute on Taxation and Economic Policy (ITEP) was joined by the advocacy organization Citizens for Tax Justice (CTJ) in releasing the 32-page report earlier this week, “Corporate Tax Dodging in the Fifty States, 2008-2010.”
In its examination of annual financial reports submitted by 265 profitable Fortune 500 corporations, the study concluded that states collectively missed out on $42.7 billion in tax revenue during the three-year period.
Although such companies have operations all over the country, they do not disclose profits and taxes on a state-by-state basis, the report said.
Some taxpayer advocates argue that states need to offer more corporate tax breaks in order to attract commerce into their communities, but others argue that corporations that do not pay their “fair share” are helping to starve the public school system of much-needed revenue.
Voices for Utah Children, an advocacy group, reviewed the study and concluded that dozens of the companies operating in Utah — including Wells Fargo and Intel — made millions of dollars in profits nationwide but paid 1 percent or less in state income tax during those years. That’s well below the state’s statutory rate of 5 percent.
Efforts to reach representatives of Wells Fargo and Intel were unsuccessful Friday.
Allison Rowland, the group’s research and budget director, said such actions directly impact the state’s future.
“When big corporations don’t pay state income taxes, our public schools have less money,” Rowland said in a statement, adding that Utahns who work for these Fortune 500 companies might be surprised to discover they pay state income taxes at a higher rate than their corporate employers.
Rowland said the study can’t measure whether companies paid income tax in Utah given that they are not required to disclose that information.
“Still, it makes clear just how many of them paid little or no state income tax on balance,” Rowland said.
While Wells Fargo made $49.7 billion in profits over the three-year period, the bank paid only 0.7 percent in state income tax. But the study also points out that some corporations appeared to pull their own weight — JP Morgan Chase & Co. earned $32.7 billion in profits while paying 9.1 percent in state income tax, and Whole Foods Market earned $834 million and paid out 10.3 percent in state income tax.
The ITEP study ignores a fundamental fact, said Royce Van Tassell, vice president of the Utah Taxpayers Association.
“Corporate income is also taxed a second time as individual income when it gets distributed to shareholders,” Van Tassell said. “To say that corporations aren’t paying their fair share is really an anomaly — those taxes are paid for by workers, shareholders and consumers.”
Van Tassell advocates trimming corporate tax wherever possible in order to attract business investment into Utah.
But Doug Macdonald, former chief economist for the State Tax Commission and current chief economist and president of Econowest Associates Inc., said cutting corporate taxes would further undermine Utah’s public school funding.