A comprehensive new study that profiles 265 consistently profitable Fortune 500 companies finds that several companies headquartered in Missouri paid little or no state corporate income taxes in recent years. The new study, “Corporate Tax Dodging in Fifty States, 2008-2010,” was released Dec. 7 by the Institute on Taxation and Economic Policy (ITEP) and Citizens for Tax Justice (CTJ) in conjunction with Missourians for Tax Justice (MTJ). The report also 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.
Among Missouri companies averaging less than a one-percent tax rate for the years 2008-2010:
- Peabody Energy – With profits of just over $1 billion, various tax breaks allowed a –0.6% three-year tax rate.
- Monsanto – With profits of almost $5 billion, their three-year tax rate was .4%.
- Ameren – With profits of almost $3 billion, their three-year tax rate was .8%.
“Missouri has many needs that are going unmet. For example, the cost of higher education has spiraled, and many fear that our veterans’ homes are on the verge of closure,” said Rev. Ben Martin, member of the executive committee for MTJ. “No wonder the ‘Occupy Wall Street’ movement has been spreading throughout our nation when tax data shows that very profitable companies are contributing so little in tax dollars needed to improve our common lot.”
“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, the report’s co-author. “They’re so busy avoiding taxes, it’s no wonder they’re not creating any new jobs.”
“Corporate Tax Dodging in the Fifty States, 2008-2010″ concludes that these 265 corporations cost states $42.7 billion in lost revenues in the last three years. Gardner identifies three chief causes that state corporate tax revenues have been steadily declining for two decades. First, state lawmakers continue to enact tax subsidies requested by corporations, most of which do not produce the promised economic results. Second, federal tax breaks enacted in the past decade further reduce state corporate income tax revenues since states generally accept corporations’ federal tax numbers. Third, said Gardner, “and most insidious, is that multi-state corporations themselves devote their money and legal firepower to coming up with tax avoidance schemes.”
Three potential solutions to the unfairness and loss of revenue outlined in the report are:
- Combined reporting, which effectively treats a parent company and its subsidiaries as a single corporation for state tax purposes. It eliminates most of the advantage of shifting profits into Delaware, Nevada and other low- or no-tax states.
- Decouple from federal tax loopholes, such as bonus depreciation, and other provisions which reduce the amount of taxable income that corporations have to claim in their state tax filings.
- Increase disclosure, transparency and accountability. Corporations should be required to publicly report their in-state profits, as well as any subsidies or loopholes they are exploiting each year.
Missouri does not currently have a corporate tax disclosure law, but former state representative Beth Low (D-Kansas City) filed such a bill annually from 2006 until leaving the General Assembly at the end of 2010. Rep. Jill Schupp (D-St. Louis County) has announced that she will file a corporate tax disclosure bill in 2012. Schupp said, “Our neighbors need to know whether corporations are paying their fair share of taxes or not. It is only fair and responsible that corporations invest in our streets and highways, schools, police and fire protection, and the many other public services that they utilize and depend upon.”
Because few states have transparency regarding business taxes, it is not possible to determine specific tax amounts paid by corporations to individual states; all figures in “Corporate Tax Dodging in Fifty States, 2008-2010″ are aggregate for taxes paid to all U.S. states by each corporation.
The study is online at http://www.ctj.org/corporatetaxdodgers50states/.
MTJ was glad to see the St. Louis Post-Dispatch editorial board take on the topic of Missouri’s outdated and unfair individual income tax system. We’ve been trying to address that with the Tax Justice for a Healthy Missouri reform plan for more than five years. As more Missourians learn the facts, such as those shared in the Post-Dispatch, our movement is growing.
To read a response from Representative Jeanette Mott Oxford, scroll down to A Fairer Tax Plan at the bottom of the page.
Missourians for Tax Justice (MTJ) is joining social service, religious, and community organizations throughout Missouri in denouncing a plan within the state’s General Assembly to eliminate renters from eligibility for the Circuit Breaker program. The Circuit Breaker reduces property taxes for the poorest segment of elderly citizens and persons living with disabilities. In 2010, almost 100,000 seniors, disabled veterans, and others living with disabilities were helped by the Circuit Breaker program.
“The Circuit Breaker program makes it possible for many older Missourians and persons with disabilities to stay in their homes,” said Vickie Riddle, chair of the Affordable Housing and Homeless Task Force of Missouri Association for Social Welfare, a member organization of MTJ. “With most tax refund checks arriving right after the costly winter heating season, the Circuit Breaker helps pay utility arrearages that might otherwise lead to a utility disconnection or the evictions that often ripple out from high utility bills.”
“Where are the hearts of our lawmakers?” asked Rev. Ben Martin of MTJ member group Missouri Interfaith IMPACT. “It is morally reprehensible to take $50 million from a program that keeps housing secure for our neighbors who are older or disabled. It is even more offensive that these funds are targeted for diversion to risky corporate welfare schemes not based on independent economic feasibility studies.”
Missouri House and Senate leaders have stated that cuts from the Circuit Breaker program, plus sunsets of several other social benefits tax credits, will be used to fund new tax credit programs. Programs proposed include subsidies for amateur sporting events, data centers, science and innovation businesses, and creation of a “China Hub” at Lambert International Airport in St. Louis, despite statements from air cargo professionals that Lambert is a long shot as a candidate for an “Aerotropolis.”
The Youth Opportunities Program (YOP) and Neighborhood Assistance Program (NAP) are among social benefits tax credits facing sunsets. YOP and NAP provide funding for violence prevention in schools, services for pregnant teens, child care for at-risk children, and additional community services.
“We cannot balance the budget on the backs of the most vulnerable population, be they children or the elderly or the handicapped,” said Alan Erdman, director of Lutheran Family and Children’s Services. “We have a social responsibility to care for neighbors who are facing special challenges to health and survival. ”
Erdman said that NAP and YOP credits bring an incredible return on investment. Erdman continued, “It is estimated that keeping just one youth out of the juvenile justice system saves the state about $40,000 per year. Preventing even one teen pregnancy saves the state about $21,000 in medical costs,and ensuring one healthy full term baby saves the state about $75,000 in hospital care.”
Rea Kleeman, interim chair of MTJ, said, “Missouri’s previous so-called economic incentive packages have all too often smelled of backroom deals arranged between elected officials and special interests that donate heavily in electoral cycles. We need reform so that all our tax policies are carried out with honesty, transparency, and accountability.”
MTJ offered the following list of safeguards that should be a part of any economic development package offered by the state of Missouri:
Public Disclosure – Subsidy spending and company compliance must be readily available to the public.
Clawbacks – If companies fail to meet the obligations agreed to as a condition of receiving an incentive, they should be required to return all or part of the subsidy (called a “clawback” or recapture provision).
Quality Jobs –Subsidized companies must create full-time positions paying family-supporting-wages and providing health insurance and other benefits.
Avoiding the Race to the Bottom – Overall tax policy should be kept out of subsidy debates to avoid disastrous tax-reduction competitions. A decline in public services due to inadequate revenue does nothing to improve a state’s economic health in the long-term.
No More “Rob Your Neighbor” Games – Pacts between states or localities should be set up to forgo the use of subsidies to lure companies from one another’s jurisdictions.
MTJ is a statewide grassroots advocacy organization comprised of more than 30 religious, labor, and community organizations. MTJ Justice supports a fair and balanced state tax structure that will produce adequate revenue for needed public services.
Despite improved collections thus far, net General Revenue collections during the first ten months of Fiscal Year (FY) 2011 are $5.862 billion. This is below the level attained after the first 10 months of FY 2006 which were $5,979.4 million. The state has a severe revenue problem which cannot be solved by cutting taxes. Why then would Missouri elected officials choose to phase out the corporate franchise tax which produced $87.5 million in 2010?
Senate Bill 19 which was passed by both the Missouri House and Senate and then signed into law by Gov. Jay Nixon will phase out the corporate income tax until it is completely eliminated in 2016. While those who supported this bill tout the importance of being “business friendly” and providing incentives for companies to locate in Missouri, they neglect to mention that Missouri already has the 45th lowest corporate income tax in the country (counting the franchise and other corporate taxes).
According to a letter to the editor by Kelly Davis, Midwest Director of the Institute on Taxation and Economic Policy, published in the St. Louis Post-Dispatch on May 4, 2011, “The elimination of the franchise tax puts pressure on the state’s only other major tax on corporations — the corporate income tax. But Missouri’s corporate income tax is riddled with loopholes. Measured as a share of the state’s economy, it’s the lowest of any state with a corporate income tax.”
Davis continues, “Because there is no public disclosure of Missouri corporate income tax payments, it’s impossible to know whether specific profitable companies are avoiding the Missouri tax. But when companies like Missouri-based Monsanto are paying less than zero in state corporate income taxes nationwide (as was the case in 2010, when Monsanto reported $1.2 billion in pretax U.S. profits and a nationwide state income tax rebate of $1 million), it’s important to ask questions about the effectiveness of the tax. With the demise of the franchise tax, now is the time to ensure that the corporate income tax is as robust as possible.”
According to America’s Top States for Business 2010, a CNBC special report that scored all 50 states based on ten broad measures of competitiveness, Missouri ranked 5th in the nation for “the cost of doing business.” Unfortunately we also ranked 29th for the quality of our workforce and 39th for the quality of life.
For Missouri to improve its economic environment to be truly business-friendly, we must invest adequately in the common good so that corporations are able to depend on an educated workforce, a first class infrastructure, a strong court system, etc. Missouri should enact a corporate tax disclosure law to gather data needed to close loopholes and set a fair level of taxation for corporations, as well as acting to create an individual income tax code that is more modern, fair, and adequate.
You are invited to the next meeting of Missourians for Tax Justice and the Tax Justice for a Healthy Missouri Coalition on Monday, April 18, 2011, 10:30 a.m., at the Center for Social Justice, 606 E. Capitol, Jefferson City, MO. Guests will include Dr. Mandy and other University of Missouri-Columbia economists who will discuss a letter they sent to the General Assembly about the flaws in the mega-sales tax proposal now being debated (House Joint Resolution 8). Thanks to Missouri Association for Social Welfare for hosting this meeting.
On March 16, the Tax Reform Committee of the Missouri House of Representatives heard House Bill 581 which would create a state earned income tax credit (EITC). The bill would authorize, beginning January 1, 2011, an individual income tax credit equal to 20% of any earned income tax credit claimed by the taxpayer on his or her federal income tax return.
The Missouri Earned Income Tax Credit bill was first proposed in the late 1990’s by then-representatives Joe Maxwell and Vicki Riback Wilson, but has not had a hearing for more than a decade. Missourians for Tax Justice applauds Speaker of the House Steve Tilly and Tax Reform Committee Chair Rep. Doug Funderburk for allowing this bill to be heard. Rep. Jeanette Mott Oxford (D-St. Louis) has sponsored the bill annually since 2005.
According to the Institute on Taxation and Economic Policy (ITEP):
- Missourians in the poorest 20 percent of the income distribution who qualify for the EITC would see a tax cut averaging $331.
- Missourians in the second 20 percent of the income distribution who qualify for the EITC would see a tax cut averaging $617.
Kelly Davis, staff member at ITEP, wrote in her testimony, “This bill would make Missouri’s tax system less unfair. The proposal would reduce Missouri revenues by approximately $200 million in 2010. Eighty percent of the benefits would go to the poorest forty percent of Missourians —exactly the income groups who pay the largest share of their income in Missouri taxes under current law.”
Amy Blouin of Missouri Budget Project also provided testimony in support of the bill. Blouin wrote: “A State EITC could benefit as many as 440,000 Missouri families and is also proven to be a valuable economic stimulus, generating economic activity that would reach every corner of Missouri.”
Missourians for Tax Justice is especially thankful to Sheila Durnell, a federal EITC recipient served by Central Missouri Community Action Agency, who explained how the EITC helps her family and how a Missouri equivalent could improve their circumstances.
To read the Missouri Budget Project testimony, please go to:
To read the Institute on Taxation and Economic Policy testimony, please go to:
A new report released today by the Institute on Taxation and Economic Policy (ITEP) finds that Missouri could receive upwards of $394 million per year if it were to repeal its state income tax deduction for federal income taxes paid. According to the report, Topsy-Turvy: State Income Tax Deductions for Federal Income Taxes Turn Tax Fairness on its Head, Missouri is one of just six states to offer this costly tax break. Together, those states will lose more than $2.5 billion in 2011 from this policy.
“Missouri’s deduction for federal income taxes paid deprives the state of millions of dollars in needed funds and benefits almost exclusively the very wealthiest members of our communities, failing to promote tax fairness,” remarked Rea Kleeman, Interim Chair of Missourians for Tax Justice (MTJ). Meg Wiehe, ITEP’s State Tax Policy Director added, “Right now, legislators across the country are searching for solutions to mounting budget deficits, solutions that will allow them to fund vital public investments without placing additional responsibilities on those families struggling to make ends meet. Repealing costly, inequitable, and ineffective tax breaks like Missouri’s deduction for federal income taxes paid are the first place they should look.”
In practice, very few working class Missourians would benefit from the repeal of the deduction for federal income taxes paid. Missourians in the top 20% receive 59% of the benefit from the deduction, while the poorest 20 percent of taxpayers hardly see any benefit from the deduction. In fact, taxpayers in the top 1% of income earners receive an average benefit of $543 from the deduction compared to the bottom 20% who receive just $1 on average.
The deduction for federal income taxes paid is also quite expensive. As the report notes, this deduction is expected to cost Missouri $394 million in 2011, which equates to 8% of the total revenue generated by the state’s income tax. As a result, Topsy-Turvy: State Income Tax Deductions for Federal Income Taxes Turn Tax Fairness on its Head finds that repealing of the deduction for federal income taxes paid could bring in substantial and necessary revenue to the state’s coffers. Said Wiehe, “Missouri lawmakers face a clear choice: keep in place a tax break that largely benefits the wealthy few or repeal that tax break and fund the investments in education and infrastructure that will speed economic recovery.”
In addition to the release of the ITEP report on March 30, Rep. Jeanette Mott Oxford (District 59, St. Louis City) also filed HB 930 to end the Missouri deduction for federal taxes paid. MTJ applauds Rep. Oxford for taking action to end this poorly targeted feature of Missouri taxes.
Missourians for Tax Justice (MTJ) is a statewide grassroots advocacy organization comprised of more than 30 religious, labor, and community organizations. MTJ Justice supports a fair and balanced state tax structure that will produce adequate revenue for needed public services.
Based in Washington, DC, the Institute on Taxation and Economic Policy is a non-profit, non-partisan research organization that seeks to inform policymakers and the public of the effects of current and proposed tax policies on tax fairness, government budgets, and sound economic policy. Copies of A Topsy-Turvy: State Income Tax Deductions for Federal Income Taxes Turn Tax Fairness on its Head, including detailed estimates of the impact repealing the deduction for federal income taxes paid would have in each of the six states highlighted in the report, are available at www.itepnet.org.
On Feb. 23, 2011, the House Tax Reform Committee voted along straight party lines in favor of a proposed constitutional amendment that would eliminate Missouri’s income tax and replace it with a mega tax on virtually all goods and services. The committee’s four Democrats opposed the measure, the so-called “Fair Tax”, which was supported by the panel’s eight Republicans.
Under House Joint Resolution (HJR) 8 sponsored by state Rep. Andrew Koenig (R-St. Louis County), the state’s sales tax would nearly double from the current 4.225 percent to 8.225 percent. And in addition to applying to sales of goods, the mega tax would also be charged on services – everything from haircuts to legal services and doctor’s visits – which have never previously been subject to sales taxes.
Studies have shown that low-income families spend three-fourths of their income on items subject to the sales tax already. This number would obviously increase if the sales tax were on everything. Middle income families spend about half of their income on items subject to the sales tax, and the richest families spend only about a sixth of their income on sales-taxable items. This is why the sales taxes are regressive and unfair.
Even with the substantially higher and more broad-based sales tax rate, critics of the mega tax including Missourians for Tax Justice contend it would fall well short of replacing the nearly $5.1 billion a year net the state receives from individual and corporate income taxes. These funds account for more than 70 percent of Missouri’s general revenue budget.
According to our allies at the Missouri Budget Project: “Under the proposal, the sales tax rate may be as high as 12.25 percent for the state sales tax, plus 2.75 percent local sales tax, depending on what exemptions are included.” If Missouri experiments with a sales tax that is too low to replace needed revenues, devastating budget cuts could follow that would be disastrous for our schools, senior citizens, and the health and public safety of Missourians.
HJR 8 still must be approved by the full House of Representatives before it can advance to the Senate. If it passes both chambers, it would automatically go before Missouri voters on the November 2012 ballot. Missourians for Tax Justice urges all concerned citizens to contact their representative and senator in opposition to HJR 8.
Missourians for Tax Justice (MTJ), a statewide grassroots advocacy organization comprised of more than 30 religious, labor, and community organizations, applauds the filing of House Bill (HB) 637 in the House of Representatives on February 22, 2011. Rep. Jeanette Mott Oxford (D-St. Louis) is sponsor of HB 637 – the “Tax Justice for a Healthy Missouri Plan”- and is joined by 23 co-sponsors.
Rea Kleeman of St. Louis County, MTJ Interim Chair, said, “Missouri’s individual income tax system is outdated, unfair, and inadequate. Rep. Oxford’s bill addresses each of these short-comings, and we offer our thanks to her and the co-sponsors of the bill.”
According to distributed Who Pays: A Distributional Analysis of the Tax Systems in All 50 States, the most recent edition of a periodic report issued by the Institute on Taxation and Economic Policy, when all Missouri taxes are totaled up, on average:
- Missouri families earning less than $17,000 — the poorest fifth of Missouri’s non-elderly taxpayers — pay 9.6 percent of their income in state and local taxes.
- Middle-income Missouri taxpayers — those earning between $31,000 and $50,000 — pay 9.5 percent of their income in Missouri state and local taxes.
- But the richest Missouri taxpayers — with average incomes of $1,170,600 — pay only 6.6 percent of their income in Missouri state and local taxes.
Jerry Ford, MTJ Legislative Consultant, said, “Missouri’s top tax bracket begins at $9,000 of taxable income, a figure that has not been updated since 1931. At this point 57% of Missourians pay Missouri’s top tax bracket. Yet $9,000 from 1931 converts to more than $125,000 in 2011 currency.”
HB 637 has the following features:
- Modernizes Missouri’s tax table which has not been changed since 1931.
- Reduces taxes on average for the bottom 60% of Missourians through the updated brackets and a refundable tax credit of $150 per person per household (phasing out at $50,000 per year for singles and $80,000 per year for married filing jointly).
- Creates a more fair tax system by requiring the wealthiest 20% of Missourians to pay an amount as a percentage of their incomes similar to the amount paid now by the bottom 80%.
- Raises $1.3 billion in revenue – upon voter approval.
- Raises about a fifth of that $1.3 billion by keeping Missouri dollars at home that would have gone to the federal government. (That is, when Missouri’s wealthiest taxpayers pay more to MO, they pay less to the feds due to the various “offsets” offered through itemizing federal taxes. Missouri is one of only six states allowing a deduction on state taxes for federal taxes paid, a poorly targeted tax feature.)
“When Missouri fails to address the inadequate revenue side of our budget equation, we condemn ourselves to mediocrity in many areas of community well-being,” Rep. Oxford said. “Our governor and House and Senate leaders constantly assert that we will not pass new taxes and then slash crucial services and programs that improve life in our state to balance our state’s budget. Other elected leaders have taken those same positions for years. I am reminded of the saying that insanity is to do the same thing over and over and to expect different results each time.”
Oxford continued, “I am thankful to have support for this bill from Missourians for Tax Justice and the Tax Justice for a Healthy Missouri Coalition. I was pleased to receive a hearing for the bill in 2009 and 2010 under former Speaker of the House Ron Richard. I am hopeful that Speaker Steven Tilley will also grant the opportunity for thorough examination of this commonsense proposal.”
Missourians for Tax Justice (MTJ), a statewide grassroots advocacy organization, has endorsed a NO position on Amendment 3 on the November 2 General Election ballot. If ratified by Missouri voters, Amendment 3 would change the Missouri Constitution to prohibit state or local governments from imposing a transfer tax on the sale of real estate.
“There has been no effort in the General Assembly to establish a real estate transfer tax at the statewide level or to grant cities or counties the legal authorization necessary to impose local real estate transfer taxes,” said Rea Kleeman, MTJ Interim Chair. “Every election cycle it seems we see measures on the ballot to amend the Missouri Constitution unnecessarily, and this is the latest example.”
“Missouri hasn’t increased taxes in more than a decade and, in fact, has instituted a number of unwise and poorly conceived tax cuts during that period,” said Bob Quinn, MTJ executive committee members and executive director of the Missouri Association for Social Welfare. “Strong majorities in both the Senate and the House of Representatives have ruled out any increased tax or other revenue-generating measure, even though our state has an obvious need for revenue growth in this era of job-killing budget cuts.”
“Let’s not forget that Missouri voters would be required to approve any tax increase that could produce significant revenue under a 1996 amendment to the Missouri Constitution,” added State Representative Jeanette Mott Oxford (District 59, St. Louis). “Missouri voters haven’t approved a ballot measure to increase taxes since 1987. Amendment 3 is clearly a solution looking for a problem and should be defeated.”
MTJ consists of individuals and organizations advocating together for a fair and balanced state tax structure that will produce adequate revenue for needed public services. The member organizations of MTJ include labor, religious, social service agencies, and community groups with memberships tallying tens of thousands of Missouri citizens.