Corporate data from numerous sources, including annual reports directly from the companies themselves, has been merged and matched and managed into two spreadsheets that reveal state-by-state corporate tax avoidance. The results show how people all over America are being deprived of revenue that should be going to education and infrastructure.
1. Most of the State Tax Avoidance is by the Largest Companies
Before considering individual states, it will be instructive to consider the total state tax payments (and non-payments) by 45 of the nation’s largest corporations. The data is derived from “current state tax” figures in the 10-K forms submitted to the SEC by the companies themselves.These 45 corporations paid about $15 billion over two years, less than a third of their required state tax obligation of $46 billion, as calculated with the 2014 corporate state tax rates in their home states. Over $30 billion was avoided by these corporations in 2013-14, often by deferring taxes, and in some cases by using hypothetical or theoretical amounts to ‘meet’ their obligations.
2. Corporations Avoided DOUBLE the Amount of All State Deficits Combined
The second spreadsheet at PayUpNow itemizes, for each state, corporate state taxes paid and owed. The corporate world paid about half their required taxes in 2014. The avoided amount of $50.3 billion is almost twice the total of all recently reported state deficits (Column I). The corporate avoidance leader by percentage is Louisiana, the state with arguably the greatest need for infrastructure and job and education funds after the devastation of Katrina. Corporations there paid only 14% of their required taxes.
3. Some States could have Paid Off Their Deficits with HALF Their Unpaid Corporate Taxes
Pennsylvania, Maryland, Michigan, and Alabama were all underpaid by amounts twice or more the totals of their deficits. Louisiana, Arizona, and Wisconsin were close behind.
4. Almost $100 Billion in Corporate Welfare — Almost as Much as the Entire 50-State Tax Bill
Good Jobs First has identified state and local corporate tax deals for 2015 that total nearly $100 billion, almost equivalent to the full $103 billion tax bill, and almost twice the amount actually paid. New York leads the way with $12.5 billion in deals. Michigan paid out $10.3 billion, twenty times its deficit, with over $3 billion going to scandal-ridden and largely unpunished General Motors. Washington State paid out $11.9 billion, six times its deficit, and all of it to Boeing, which paid minimal state AND federal taxes. Louisiana shows up again: the beleaguered state with hardly any corporate tax money and a $1.6 billion deficit gave out $6.9 billion in corporate tax subsidies.
5. States with the Most Outrageous Stories
Some states deserve special mention because of the egregious nature of their disrespect for average taxpayers. Illinois leads the way with by far the highest deficit. Just 10 companies underpaid Illinois $1.4 billion in 2014, more than the entire 2016 Chicago school system deficit. Yet Governor Bruce Rauner recently approved $100 million in new corporate tax breaks. And now Mayor Rahm Emanuel is preparing to raise city property taxes by $500 million. All this in a state named one of the “Terrible Ten” most tax-regressive states by the Institute on Taxation and Economic Policy (ITEP).
In California, three of the largest and most visible companies (Google, Intel, Wells Fargo) paid just 1.6% of their profits in state taxes, less than 1/5 of the required rate. California had one of the nation’s highest educational spending cuts per student from 2008 to 2014.
Then come the stadiums. In numerous states, corporate welfare went to sports teams. A Pacific Standard report stated: “Over the past 20 years, 101 new sports facilities have opened in the United States—a 90-percent replacement rate—and almost all of them have received direct public funding.” Three of the worst offenders are the states of Georgia, Indiana, and Pennsylvania, which funded new sports facilities with public money, while together collecting only one-third of the corporate taxes owed to them in 2014.
Based on the available data, the states least affected by tax avoidance, deficits, and corporate deals are North Dakota, South Dakota, Wyoming, and New Hampshire. The Mercatus Center ranking of financial health for the 50 states places them 2nd, 3rd, 6th, and 20th, respectively. However, all four were in the top half of ITEP’s most tax-regressive states.
Embarrassingly notable for Illinois is that it had the worst financial health and the 5th-most regressive taxes.