A new study profiling 265 profitable Fortune 500 companies finds that multiple North Carolina-based companies have been able to sharply reduce their state corporate income tax bills, likely costing North Carolina millions.
“Corporate Tax Dodging in the Fifty States, 2008-2010” was released Wednesday by the Institute on Taxation and Economic Policy (ITEP) and Citizens for Tax Justice (CTJ) in conjunction with the North Carolina Budget & Tax Center.
The report finds a total of 68 companies that paid no state corporate income tax in at least one of the last three years, and 20 of them averaged a tax rate of zero or less during the 2008-2010 period. In North Carolina, six of the 11 profitable Fortune 500 companies headquartered here paid tax rates below 4 percent of the profits they earned during that three-year period.
“Our report shows these 265 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.
The authors of the report say the findings are significant as states are cutting or eliminating services to cope with sizable budget deficits.
At the time of the release of the report, North Carolina lawmakers gathered for the Revenue Laws Study Committee meeting where they are considering new legislation that would make it even easier for multi-state corporations to avoid paying taxes.
Edwin McLenaghan, an analyst with the NC Budget and Tax Center, says instead of opening the door to even more corporate tax avoidance, lawmakers should enact clear rules that ensure all companies contribute to the schools, roads and quality of life that are critical to a strong economy,
McLenaghan, who recently appeared on News and Views, says one of the single most important corporate tax reforms available to North Carolina is a practice used by 23 states called “combined reporting.”
To hear McLenaghan discuss combined reporting, click below. To read the complete study online, click here.