Profitable corporations in North Carolina paid lower state tax rateState leaders push for still more corporate tax cuts
As North Carolina struggles with tough budget decisions about essential public services, profitable Fortune 500 companies in North Carolina – which include Duke Energy, Progress Energy, BB &T Corp., Family Dollar Stores, and Lowe’s – are paying little in state income taxes thanks to copious loopholes, lavish giveaways and crafty accounting, says the Budget & Tax Center, a project of the NC Justice Center.
A new report, 90 Reasons We Need State Corporate Tax Reform by the Institute on Taxation and Economic Policy and Citizens for Tax Justice, examined 269 Fortune 500 companies that were profitable every year between 2008 and 2012. Nine corporations headquartered in North Carolina were on that list. The study found that as these companies push state government for more tax breaks, they already are exploiting existing loopholes to avoid state income taxes.
“State leaders passed and Gov. Pat McCrory signed a tax plan into law last year that includes huge tax cuts for profitable corporations. And even now state lawmakers are considering more tax cuts for profitable corporations,” said Alexandra F. Sirota, director of the Budget & Tax Center. “When corporations receive these tax cuts there is no job creation benefit, but there is a significant loss to the state in the form of foregone investment in the foundations of a strong business climate.”
Between 2008 and 2012, the nine corporations headquartered in North Carolina paid an average overall corporate income tax rate of just 3.7 percent, well below the state’s 6.9 percent statutory rate at the time, on more than $51 billion in combined profits.
The report comes at a time when lawmakers in North Carolina are considering additional tax changes such as shifting to a single sales factor apportionment formula for determining the amount of state income taxes paid by corporations. As the Budget & Tax Center has reported, such a change would benefit only certain businesses and would reduce revenue for public investments by around $90 million for FY 2015.
“North Carolina has a ways to go in adopting true corporate tax reform that ensures adequate and fair revenue is collected from businesses,” said Cedric Johnson, a public policy analyst with the Budget & Tax Center. “Current efforts to push for a single sales factor or pursue outright elimination of the corporate income tax are fiscally irresponsible proposals that don’t achieve true reform.”
Some of the report’s key findings across all states:
90 companies paid no state income tax at all in at least one year, and 37 companies avoided taxes in two or more years.
10 companies, including Boeing, Merck, Rockwell Automation, paid no state income tax at all over the five-year period covered by the study.
The average weighted state corporate income tax rate is 6.25 percent, but the 269 companies paid an average rate of just 3.06 percent.
The companies examined collectively avoided paying $73.1 billion in state corporate income tax.
“The first step in any state’s corporate tax reform should be ensuring corporations are actually paying taxes,” said Meg Wiehe, director of state tax policy at the Institute for Taxation and Economic Policy. “At a time when public services that ordinary people rely on face inadequate funding, we shouldn’t be having a conversation about lowering taxes for profitable corporations, which only means the rest of us have to pay more. We should be talking about how to ensure corporations are paying their fair share”
To view the study, go to: ctj.org/90reasons/