The Effective State Tax Rate Paid by Profitable Fortune 500 Corporations Is Declining,Yet States Continue to Actively Dismantle Their Corporate Income Taxes
(Washington, D.C.) As states struggle with tough budget decisions about funding essential public services, the average effective state tax rate paid by profitable Fortunate 500 companies continues to drop due to copious loopholes and lavish corporate tax giveaways, according to 3 Percent and Dropping, a new study by the Institute on Taxation and Economic Policy.
For a state-by-state breakdown of which companies are paying little or no taxes, go to page 38 of the study.
This report comes at a time when lawmakers have considered outright repeal of their state corporate income taxes, and when several other states have moved to cut their corporate rate.
The comprehensive eight-year study examined 240 Fortune 500 companies that were profitable every year between 2008 and 2015. It found that the average effective state tax rate paid by profitable corporations is 2.9 percent. The average statutory state corporate tax rate is about 6.25 percent, which means that over this eight-year period, corporations paid less than half the average effective state tax rate. Further, since ITEP’s last comprehensive look at state corporate taxes in 2014, the average effective rate paid by corporations has dropped from 3.1 percent to 2.9 percent.
“States across the nation annually grapple with how to adequately fund public priorities such as education, public safety, infrastructure and other vital services,” said Meg Wiehe, deputy director of ITEP. “Too often, the solution to revenue shortfalls is regressive consumption taxes that capture a greater share of income from states’ lowest-income residents. Corporations benefit from an educated workforce, paved roads and safe communities. They should contribute their fair share of tax revenue that makes these things possible.”
3 Percent and Dropping is a companion report to the recent federal corporate study, The 35 Percent Tax Myth that showed many Fortune 500 corporations are paying barely more than half the federal statutory rate, and at least 100 profitable companies were able to pay zero in federal corporate taxes in at least one of the last eight years.
Among the state report’s key findings:
- Over the study period, more than half of the profits from Fortune 500 corporations escaped state taxes entirely.
- In total, the 240 companies avoided $126 billion in state corporate income taxes over the eight-year period.
- Despite profits, 92 of the 240 companies managed to pay no state income tax at all in at least one year from 2008 to 2015. Forty-nine of these companies enjoyed multiple no-tax years.
- In 2015 alone, 24 companies paid no state income tax. Another 131 (over half of the companies in our sample) paid less than half the weighted-average statutory state corporate tax rate that year.
To view the study, go to: http://itep.org/itep_reports/2017/04/3-percent-and-dropping.php