In 2015, a large, multi-state corporation reported Montana sales of more than $1 billion. It paid $50 in tax. In fact, it paid only $50 in tax for five years in a row, 2011 to 2015.
It had company, so to speak; 81 other multi-state firms out of the top 500 companies, based on Montana sales, paid the minimum tax of $50 in 2015. Their Montana sales ranged from $8.6 million to $1.009 billion. Thirty-two of them also paid the minimum tax for five years in a row. (In addition, 156 firms out of the top 500 paid less than $500 in tax in 2015.)
Now sales do not equal profit, on which corporations are taxed, but if you’re not making a profit on a billion bucks' worth of sales, you’ve got a problem. Or, maybe you’ve just got a crackerjack tax lawyer, which makes more sense.
I raise this point in light of the impending vote on the Senate tax package which cuts the corporate income tax rate from 35 percent to 20 percent. I fully expect that U.S. Sen. Steve Daines will vote for it, but I would hope that this, and one more example, might at least give him pause.
Montana corporate tax uses as its starting point the taxable income that is reported on the federal form, but you cannot extrapolate the amount of federal taxes paid from the amount of Montana taxes paid. Nonetheless, there is a significant relationship between them, so it’s very possible those same companies paid very little in federal tax as well. Based on that, it seems that there are corporations that already do pretty well in lowering their federal tax liability without any more help from Congress.
Because of the secrecy of corporate tax information (it was public information when President Taft championed it in 1909), it is difficult for legislators or members of Congress or the Senate to fully understand the effects of tax legislation on corporations other than relying on the truthfulness of the corporations themselves. It is not easy to make an informed decision if you can’t get information, leaving gut feeling and lobbying as the major influences on a senator’s vote.
The second example speaks to the belief — religion, almost — that corporate tax cuts increase jobs and will spur a corporate relocation to America, thus “repatriating” taxes.
In 2013, the Boeing Aircraft Corporation, which has done business in Washington state for over 100 years, informed Democratic Gov. Jay Inslee that unless Boeing got considerable tax and labor concessions, they would be building their facility to produce the Boeing 777X elsewhere. In a seeming panic, Inslee called a special session of the legislature, although it would be only two months before their regular session. Within three days Boeing was granted the largest tax cut every granted by a state: $8.7 billion. The Machinists Union also granted concessions.
The result? In the next four years Boeing cut 12,655 jobs in Washington state. (Los Angeles Times, May 2.)
If Boeing feels no loyalty to the state in which they thrived for 100 years, what loyalty do American corporations that have moved overseas have to America? Corporate patriotism is notable for its absence.
On at least two levels the Senate tax bill is bad for the nation; it won’t work and will increase the deficit. I hope Senator Daines cares enough about that to vote against the bill.
(Montana tax data supplied by the Tax Policy and Research Bureau, Montana Department of Revenue.)