What do Pennsylvania-based companies PPL, H.J. Heinz, Airgas, Allegheny Technologies, Hershey, and Comcast have in common? They each pay little or nothing in state income taxes, according to a new report from the Institute on Taxation and Economic Policy (ITEP) and Citizens for Tax Justice (CTJ).
The new study documents how corporate loopholes, tax breaks, and crafty accounting have allowed many Fortune 500 companies to avoid paying state income taxes. In all, researchers looked at 269 Fortune 500 companies, including 16 based in Pennsylvania, that were profitable every year between 2008 and 2012. Of those, 90 companies avoided state income taxes altogether in one or more years.
This is especially troubling for Pennsylvania, where state corporate tax collections have declined as a share of total tax revenue over the past 30 years. The phase out of the capital stock and franchise tax, corporate tax loopholes, and other tax breaks are the primary reasons for the decline.
A law passed last year to close corporate tax loopholes in Pennsylvania failed to get the job done, leaving companies free to continue to avoid paying income taxes. New tax credits and other policy changes mean that corporations are paying a smaller share of taxes overall in Pennsylvania, leaving other taxpayers to contribute more.
This erosion of corporate tax revenue threatens Pennsylvania’s ability to make investments in the future, including funding increases proposed by the governor for public schools, a new college scholarship program, domestic violence prevention, and other human services.
Business tax cuts have also done very little to bring new jobs to Pennsylvania. Job growth in the commonwealth has lagged well behind most other states, ranking 48th out of the 50 states in 2013.
If we are going to get our economy back on track, corporations must pay their share of taxes like the rest of us. Only then will we be able to invest in strong schools and other building blocks of our economy.
The ITEP/CTJ report found:
- 90 companies paid no state income tax at all in at least one year, and 38 companies avoided taxes in two or more years.
- 10 companies, including Boeing, Merck, and Rockwell Automation, paid no state income tax at all over the five-year period covered by the study.
- The average weighted state corporate income tax rate is 6.25 percent, but the 269 companies paid an average rate of just 3.06 percent.
- In Pennsylvania, PPL and PNC Financial Services Group aid average income tax rates over the five-year period of less than 1 percent; Cigna, Airgas, H.J. Heinz, Allegheny Technologies, and Air Products & Chemicals paid between 1 and 2 percent on average; Wesco International and AmerisourceBergen paid between 2.1 and 3 percent on average; Consol Energy, Hershey, and Comcast paid between 3.1 and 4 percent on average; PPG Industries, Dick’s Sporting Goods, and Universal Health Services paid between 4.1 and 5 percent on average; and UGI paid 6 percent on average.
- The 269 companies examined collectively avoided paying $73.1 billion in state corporate income tax.