States have laid off 500,000+ in the past 3 years; companies have avoided $42 billion in state taxes

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States have laid off 500,000+ in the past 3 years; companies have avoided $42 billion in state taxes. -- by Meteor Blades

Beset by budget shortfalls that are partly the consequence of failure to reform their tax structures, state and local governments have been laying off hundreds of thousands of workers since mid-2008. An exact figure is hard to come by because the lay-offs keep coming. In addition to lay-offs, furloughs are now common. In some cases, they amount to a dozen or more days a year, effectively making these employees part-timers. Others have seen their salaries frozen for years.

The Great Recession gets the blame for much of this. But that's not the only problem. Corporate deadbeats have contributed immensely.

Robert McIntyre at Citizens for Tax Justice and Matthew Gardner at the Institute on Taxation and Economic Policy have released a second installment in their look at corporate tax dodgers, a follow-up to November's Corporate Taxpayers & Tax Dodgers. That one showed how corporations weasel out on their federal taxes. The latest shows that 265 profitable corporations have stiffed the states for $42.7 billion in the past three years. And 68 of them paid no state taxes at all in at least one year of the three-year period. All that money could have gone to covering the salaries of teachers and firefighters and kept open parks and libraries. In a statement released with the report:

“Our report shows these corporations raked in a combined $1.33 trillion in profits in the last three years, and far too many have managed to shelter half or more of their profits from state taxes,” said Matthew Gardner, Executive Director at the Institute on Taxation and Economic Policy and the report’s co-author. “They’re so busy avoiding taxes, it’s no wonder they’re not creating any new jobs.”

Among the 20 corporations who paid zero or less in state corporate income taxes over the three year period are: Utility provider Pepco Holdings (DC); pharmaceutical giant Baxter International (IL); chemical maker DuPont (DE); fast food behemoth Yum Brands (KY); high tech manufacturer Intel (CA). All 265 corporations, headquartered in 36 states, are listed in the report, Corporate Tax Dodging in the Fifty States, 2008-2010, which concludes that these 265 corporations cost states $42.7 billion in lost revenues in the last three years, and Gardner identifies three chief causes for state corporate tax revenues steadily declining for two decades. First, state lawmakers continue to enact tax subsidies requested by corporations, most of which don’t produce the promised economic results. Second, federal tax breaks enacted in the past decade further reduce state corporate income tax revenues since states generally accept corporations’ federal tax numbers. Third, said Gardner, “and most insidious, is that multi-state corporations themselves devote their money and legal firepower to coming up with tax avoidance schemes.”

What happened? The average corporate tax rate across the states is 6.2 percent. But between 2008 and 2010, those 265 companies “paid state income taxes equal to only 3.1 percent.” At the full rate, states would have collected another $82.6 billion in revenues. But the corporations only paid $39.9 billion, thus costing the states $42.7 billion over three years, which could have eased the budget traumas they now suffer.

The report points out:

As recently as 1986, state corporate income taxes equaled 0.5 percent of nationwide Gross State Product (a measure of nationwide economic activity). But in fiscal year 2010, state and local corporate income taxes were just 0.28 percent of nationwide GSP, equaling the low-water mark set in 2002. For the three years between fiscal 2009 and 2011, in fact, state corporate income taxes were at their lowest sustained level, as a share of the U.S. economy, since World War Two.

How did the corporate world accomplish this? The same way it has at the federal level: spending billions on lobbying and campaign contributions. A big portion of the money they ought to be paying in taxes so your kid doesn't sit in a classroom of 40 and so there are enough fire-fighters to put out the blaze when your neighbor's house goes alight actually is spent making sure they don't have to pay those taxes.

The report makes some straightforward recommendations for improving the situation. These are, as Andrew Leonard at Salon says, "sensible." But they run into a roadblock:

Earlier this year, the House Judiciary Committee approved H.R. 1439, the so-called “Business Activity Tax Simplification Act” (BATSA), which would make it substantially more difficult for states to effectively tax the income earned by corporations from activities within their borders.

The bill’s sponsors—and the corporate lobbyists pushing this plan—say that the goal of the bill is to limit state and local governments to taxing only those businesses with a “physical presence” in a state.

One more reason to stand with the folks getting pepper-sprayed in the streets for speaking against the corporadoes and their puppets who have delivered us into the economic mess that plagues us at every turn.