In a previous post [3], 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 [4] have some form of business tax). State corporate income taxes [5] (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 [6] by Citizens for Tax Justice [7] and the Institute on Taxation and Economic Policy [8] 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.
