In a previous post, I showed how the majority of funding for education and other public services comes from state and local tax revenue, and that low-income families pay a disproportionate share of these taxes (as a percentage of income).
One of the reasons why this is the case is that many corporations – especially the largest and most profitable – have managed to avoid paying most of the state taxes that they owe (45 states have some form of business tax). State corporate income taxes (CIT) are levied on business profits – so, for the most part, it’s only the highest-income individuals who are liable (through the businesses they own) for corporate taxes (the top 10 percent wealthiest individuals own about 90 percent of all corporate stock).
A 2005 joint report by Citizens for Tax Justice and the Institute on Taxation and Economic Policy took a close look at state CIT payments by 252 Fortune 500 companies between 2001 and 2003. Their findings were astounding. These corporations were able to shelter roughly two-thirds of their actual profits from state taxation, while 71 of them paid not a penny in state taxes during at least one year between 2001 and 2003. During the years they paid no taxes, these 71 companies reported $86 billion in profits to their shareholders.