State Corporate Taxes

Few state tax trends are as striking as the rapid decline of state corporate income tax revenues. As recently as 1986, state corporate income taxes equaled 0.5 percent of nationwide Gross State Product (GSP) (a measure of statewide economic activity). But in fiscal year 2013 (the last year for which data are available), state and local corporate income taxes were just 0.33 percent of nationwide GSP--representing a decline of over 30 percent.

When thinking of tax havens, one generally pictures notorious zero-tax Caribbean islands like the Cayman Islands and Bermuda. However, we can also find a tax haven a lot closer to home in the state of Delaware - a choice location for U.S. business formation. A loophole in Delaware's tax code is responsible for the loss of billions of dollars in revenue in other U.S. states, and its lack of incorporation transparency makes it a magnet for people looking to create anonymous shell companies, which individuals and corporations can use to evade an inestimable amount in federal and foreign taxes. The…

Major tax overhauls are on the agenda in a record number of states, and “Who Pays?” documents in state-by-state detail the precise distribution of state income taxes, sales and excise taxes and property taxes paid by each income group as of January 2013.  It is a critical baseline against which future proposals can be measured. […]

Read the Report in PDF The 2015 Who Pays: A Distributional Analysis of the Tax Systems in All Fifty States (the fifth edition of the report) assesses the fairness of state and local tax systems by measuring the state and local taxes that will be paid in 2015 by different income groups as a share […]

As states struggle with tough budget decisions about funding essential public services, profitable Fortunate 500 companies are paying little or nothing in state income taxes thanks to copious loopholes, lavish giveaways and crafty accounting, a new study by Citizens for Tax Justice and the Institute for Taxation and Economic Policy reveals.

Louisiana Governor Bobby Jindal has said that he supports the elimination of the state's personal and corporate income taxes. In fiscal year 2012, Louisiana collected nearly $3 billion in revenues from its personal and corporate income taxes.

One of the thorniest problems in administering state corporate income taxes is how to distribute the profits of multi-state corporations among the states in which they operate. Ultimately, each corporation's profits should be taxed in their entirety, but some corporations pay no tax at all on a portion of their profits. This problem has emerged, in part, due to recent state efforts to manipulate the "apportionment rules" that distribute such profits. This policy brief explains how apportionment rules work and assesses the effectiveness of special apportionment rules such as "single sales factor" as economic development tools.

In October, South Carolina Governor Nikki Haley suggested that gradually repealing the state’s corporate income tax should be a priority for lawmakers in 2012. Haley’s idea was alarming, but hardly surprising: in the past year, governors in Arizona and Florida have proposed similar plans, and lawmakers in a number of other states have moved to […]

A robust corporate income ensures that profitable corporations that benefit from public services pay their fair share towards the maintenance of those services, just as working people do.. More than forty states currently levy a corporate income tax. This policy brief explains why corporations should be taxed and the basic workings of the corporate tax.

The past quarter century has seen a dramatic decline in the yield of corporate income taxes at both the federal and state levels. Major federal corporate tax legislation enacted in 2004 created a new tax break, known as the "Qualified Production Activities Income" (QPAI) deduction that has further accelerated the decline of the corporate tax. This policy brief evaluates the QPAI deduction and discusses possible state policy responses.

Every state that levies a corporate income tax must determine, for each company doing business within its borders, how much of the company's profits it can tax. One factor that all such states use to make this determination is the percentage of the company's nationwide sales that can be attributed to the state. Ideally, all of a company's sales would be attributed to the states in which it operates, but, due to differences among states' corporate income tax rules, this is not always the case. In some instances, a portion of a business' sales are not attributed to any state,…

Over the past several decades, state corporate income taxes have declined markedly. One of the factors contributing to this decline has been aggressive tax avoidance on the part of large, multi-state corporations costing states billions of dollars. The most effective approach to combating corporate tax avoidance is the use of combined reporting, a method of taxation currently employed in more than half of the states with a corporate income tax. Eight states have enacted legislation to institute combined reporting within the past five years. Commissions and lawmakers in several other states, such as North Carolina, Maryland, Rhode Island and Kentucky,…

How much is enough? On top of the close to $500 million in corporate tax breaks Illinois doles out each year, Governor Pat Quinn now finds himself confronted by a growing crowd of CEO’s demanding even more. In the wake of tax-break lobbying efforts by Motorola, Sears and Caterpillar, the latest corporation seeking preferential tax […]

My testimony today examines the erosion of Rhode Island’s corporate income tax, and the multistate tax avoidance schemes that have contributed to this erosion. In addition, it discusses the single best strategy available to lawmakers seeking to respond to the problem of corporate tax avoidance—mandatory combined reporting. Requiring combined reporting of the income of multistate […]

I’m here to talk about combined reporting, which ITEP views as a vital step towards ensuring the vitality of the Maryland corporate income tax going forward.  I’d like to use my allotted time to discuss one important policy choice that Maryland policymakers must make in implementing combined reporting. Read the Full Report (PDF)  

Consequently, combined reporting represents the most comprehensive option available to states seeking to halt the erosion of their corporate tax bases and to curtail corporate tax avoidance. It ensures that form – specifically, the form in which corporations choose to organize themselves, which may be manipulated to reduce their tax liabilities – does not triumph […]

The stated purpose of this hearing is to evaluate the impact of New York’s business taxes on equity and economic growth. These are laudable concerns: the most basic questions to ask about any corporate break are whether they are allocated fairly, and whether there’s any reason to think they will help create jobs in New […]

Over the past few months, a strong consensus appears to have developed here in Massachusetts, a consensus that the Commonwealth should put a stop to tax avoidance by large and profitable businesses and adopt a new approach to its corporate excise tax – a method of taxation commonly referred to as combined reporting. I want […]

My testimony examines a problem facing not just Maryland, but a number of different states – the erosion of the corporate income tax and the related emergence of profitable “zero-tax corporations.” I also will discuss the single best strategy available to lawmakers seeking to respond to the problem of corporate tax avoidance – mandatory combined […]

Over the past few years, a number of states, seeking to address longstanding flaws in their corporate income taxes and significant declines in the revenue they yield, have instituted a major reform: combined reporting. Combined reporting requires multi-state corporations to report the income earned by both the parent corporation and all of its subsidiaries and […]

States currently face a number of fiscal challenges, ranging from unresolved structural deficit, to underlying flaws in their existing tax systems, to the demands posed by ambitious initiatives such as improved access to health care. In response, some policymakers are casting about for new alternatives for generating revenue that do not seem to require visible or difficult changes in law. One such alternative that has gained in popularity in the past few years is a broad-based gross receipts tax.

My testimony today examines a problem facing not just Maryland, but a number of different states – the erosion of the corporate income tax and the related emergence of profitable “zero-tax corporations.” I also will discuss the single best strategy available to lawmakers seeking to respond to the problem of corporate tax avoidance – mandatory […]

The holiday season is in full swing — and chances are you’re buying gifts on the Internet or over the phone, from people you will never meet and companies that will never set foot in your state. These companies are clearly benefitting from services provided by your state government. They could not conduct their business […]

My testimony today focuses on a trend in the Maryland corporate income tax that is becoming increasingly visible—the emergence of profitable “zero-tax corporations”—and on two effective and complementary solutions to this problem, mandatory combined reporting and a gross-receipts-based minimum corporate tax. Requiring combined reporting of the income of multi-state corporations would help ensure the long-term […]

Last September, Citizens for Tax Justice and the Institute on Taxation and Economic Policy published Corporate Income Taxes in the Bush Years, an in-depth look at the taxes that 275 large, profitable corporations paid, or failed to pay, on their U.S. profits over the 2001-03 period. That study found that by 2003, these corporations were […]