Maryland Gazette: Corporations hit for ‘tax dodging’
media mentionFriday, December 09, 2011
Study says havens used to avoid paying the states on income
by C. Benjamin Ford, Staff Writer
Corporations may legally be people, but they’re people who often pay little to no state taxes, even when highly profitable, according to a new study on tax policy.
The study by the Institute on Taxation and Economic Policy and Maryland PIRG, a public policy research group, found that many corporations used tax havens to avoid paying state income taxes, including when their subsidiaries were based entirely within the state.
The report, called “Corporate Tax Dodging in the Fifty States,” found that at least 68 out of 265 corporations paid no state income taxes in any state over a three-year period.
The institute reviewed annual reports and government documents in its analysis.
Lockheed Martin Corp. of Bethesda turned a profit of $13.09 billion over the past three years, and paid $513 million — a 3.9 percent tax rate — during the same period, according to the report. In Maryland, the corporate tax rate is 8.25 percent.
“Lockheed Martin is proud to have operations in all 50 states and at all times is fully compliant with all state and federal tax laws,” said Lockheed Martin spokesman Christopher Williams.
Lockheed officials believe the report’s methodology produced results that were “erroneous and misleading, as it omits important information about legitimate tax deductions available to taxpayers who create new jobs and invest in technology development and manufacturing in the U.S.,” Williams said.
“The tax incentives available to Lockheed Martin are applicable to a broad range of taxpayers and they incentivize job creation, innovation and investment in U.S. manufacturing, which are important to our long-term economic health.”
Several companies, such as Pepco, Comcast and Verizon, do business in Maryland, but are headquartered elsewhere, and paid no taxes in any state, according to the report.
“Individual taxpayers and small businesses in Maryland end up having to pick up the tab when these corporations avoid paying their taxes,” said Jenny Levin, a spokeswoman for Maryland PIRG.
Getting combined reporting legislation passed would solve the problem, she said.
In recent years, legislation has been introduced to require corporations with subsidiaries or affiliates to file a single tax return listing the company’s business activity, instead of treating each subsidiary as a separate entity to avoid paying higher taxes. But the measure has failed to pass.
Not everyone agrees that corporations do not pay their share.
“The report is a classic study in misdirection,” said Kimberly M. Burns, president of Maryland Business for Responsive Government.
Corporate taxes are only a portion of the taxes paid by businesses, which also pay property, sales and other taxes, she said.
“Reliance on a company’s corporate income tax as a measure of paying its fair share is a gross simplification of a complex issue,” Burns said.
A recent Maryland PIRG report estimated that each state taxpayer ends up paying an additional $470 per year to cover corporations that do business in the state, but do not contribute to the state tax rolls, Levin said.
“They’re doing business in our state, they’re making money in our state, they’re using our roads and bridges, they’re using our benefits, and they should help pay for them,” she said.