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State corporate income taxes continue to shrink

News Release
April 27, 2017

As Oregon lawmakers consider raising corporate taxes to prevent cuts to schools and other public services, a new report finds that many of the nation’s largest corporations are paying little or nothing in state income taxes across the country. Despite reporting large profits to shareholders, these corporations are paying less to states in income taxes than just a few years ago, according to the Washington, D.C.-based Institute on Taxation and Economic Policy (ITEP).

“Oregon is not alone in suffering from erosion of the corporate income tax,” said Juan Carlos Ordóñez, communications director for the Oregon Center for Public Policy, who examined the ITEP report. “Corporations game the system to shed their tax obligations throughout the nation.”

Related materials:

Report: 3 Percent and Dropping State Corporate Tax Avoidance in the Fortune 500 2008 to 2015, Institute on Taxation and Economic Policy, April 27, 2017

8 key things to know about Oregon corporate taxes, Oregon Center for Public Policy, April 14, 2017

The ITEP report examined the filings with U.S. Securities and Exchange Commission of 240 Fortune 500 corporations that were profitable and disclosed aggregate state-level income tax payments. While the filings do not break down payments to individual states such as Oregon, they do show what particular corporations paid in total state income taxes nationwide.

ITEP calculated that the average statutory state corporate tax rate is 6.25 percent, and yet the 240 profitable corporations in their study together paid less than 2.9 percent in state income taxes on their U.S. profits from 2008 to 2015. This represented a drop from the 3.1 effective tax rate found in the 2008 to 2012 data. If these corporations had paid taxes at the average statutory rate of 6.25 percent, states would have had an additional $126 billion in revenue over the eight year period, the report said.

Intel, Oregon’s largest employer, is one of the companies that has paid the least in corporate income taxes to states. The semiconductor giant had an effective state income tax rate of 0.3 percent over the eight-year period, the report said. Only six of the 240 corporations studied had a lower effective tax rate. The report also noted that in two of the eight years, Intel paid no state income taxes.

The report identified 92 profitable corporations that paid nothing in state income taxes in at least one of the eight years, a list which includes Facebook, ExxonMobil, Goldman Sachs, and Comcast.

“The trend is clear: states are experiencing a rapid decline in state corporate income tax revenue,” ITEP’s report notes. “Despite rebounding and even booming bottom lines for many corporations, this downward trend has become increasingly apparent in recent years.”

That downward trend is evident in Oregon. According to the Oregon Center for Public Policy, while corporations used to contribute more than 18 percent of all income taxes collected by Oregon in the mid-1970s, that figure has dropped to less than 7 percent today.

“The erosion of the corporate income tax has resulted in Oregon having less money to invest in schools, health care, and other services that benefit all Oregonians,” Ordóñez said. “And as corporations have shed their income tax responsibilities, individuals and families have had to pick up the tab.”

With Oregon facing a $1.6 billion revenue shortfall that threatens cuts to public services, Ordóñez urged lawmakers to address the problem by raising taxes on corporations. “It’s the obvious place to start,” he said.

The Oregon Center for Public Policy (www.ocpp.org) is a non-partisan, non-profit institute that does in-depth research and analysis on budget, tax and economic issues. The Center’s goal is to improve decision making and generate more opportunities for all Oregonians.