Writings and observations

Who else pays no income tax

One of the talking points surfaced in recent months from those defending the low tax rates for the wealthiest is that many people – somewhere close to half – pay no income tax, mainly because income levels are so small and much of what remains is covered by deductions and other tax provisions. That argument overlooks the many other taxes these people do pay, from payroll to sales and (directly or indirectly) property taxes.

Maybe a little more useful is a new report out showing how much the largest corporations pay in federal and state taxes. The report called Corporate Tax Dodging in the Fifty States, 2008-2010 by the Institute on Taxation and Economic Policy and Citizens for Tax Justice was released yesterday.

In Oregon, the Center for Public Policy did a little localizing. From their statement:

“The report confirms the need for state corporate disclosure laws,” said Chuck Sheketoff, executive director of the Oregon Center for Public Policy. “Oregonians have a right to know which large corporations are using accounting gimmicks, special laws and tax loopholes to avoid paying income taxes on their profits.”

Of the 265 corporations studied, 68 paid no net state income taxes in at least one of the years from 2008 to 2010 — even as these companies together reported making almost $117 billion in pre-tax profits in the years when they paid no taxes.

That group included Intel and 19 other Fortune 500 corporations which, when adding up the past three years, paid no net state income taxes. Although Intel paid state income taxes in one of the three years, it had a negative tax rate in the other two years, according to the report. The company, which has large manufacturing facilities in Hillsboro, reported to shareholders $23.3 billion in profits during the three-year period.

International Paper is another Fortune 500 corporation with production facilities in Oregon identified as having paid no net state income taxes over the combined three-year period, though it did pay taxes in one of those years.

The report revealed a wide range of state income tax rates paid by corporations, even among companies in the same industry. For example, Wells Fargo paid state income taxes at a rate of 0.7 percent on $49.7 billion in profits during the three-year period. But another financial services company, J.P. Morgan Chase, had a tax rate of 9.1 percent on $32.7 billion in profits during the same period.

Likewise, McDonald’s had a tax rate of 4.8 percent on profits of $8.2 billion, while Yum! Brands (owner of KFC, Pizza Hut and Taco Bell) had a tax rate of -0.4 percent on profits of $1.1 billion.

Such different tax outcomes for profitable corporations in the same line of business underscore the need for disclosure, Sheketoff said.

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One Comment

  1. fortboise said:

    Most every time I’ve seen commentary about all those people who don’t pay income tax, the red flags of false comparison are flying. The overall tax burden is what matters, and how it’s apportioned between individuals, and how that apportionment reflects the benefits they get from the goods, services and infrastructure that taxes pay for.

    It’s complicated. Just like the dozens of tax structures we all navigate. Companies with $billions on the line hire accountants and lawyers to minimize their burden, and those employees get results.

    Citizens with $trillions on the line elect politicians to… break down their analogies.

    December 9, 2011

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