Jackson Free Press

Public education suffers while many of the state's largest corporations pay no state taxes, children's advocates said yesterday.

"This is a slap in the face of people who work every day, who provide for their families and who pay their taxes," said Mississippi Revenue Coalition representative Gary Anderson, who joined members of the Children's Defense Fund and the Mississippi Economic Policy Center, among others, at a Wednesday Capitol press conference.

"This is a slap in the face of small-business owners of our state who create jobs for Mississippians and who pay their taxes, and a slap in the face of our children, because they are the ones who will suffer from cuts in education due, in large part, to low tax collections."

Mississippi K-12 public education and the state's mental-health system face $77 million in cuts this year. Mississippi House of Representatives Appropriations Committee Chairman Johnny Stringer said Gov. Haley Barbour met with the committee this week to request the $77 million cut in the next budget, but that committee members refused.

"After watching public schools across Mississippi struggle to survive from $300 million in budget cuts the past three years, I and other state House members do not--and will not--support the additional budget cuts proposed by Gov. Barbour," Stringer said in a statement Wednesday.

In a March 21 letter to legislators, Barbour said that a compromise budget that does not include his $77 million cut to education and mental health hurts the state's long-term budget outlook. The governor slammed the current budget compromise as spending $58 million more in 2012 than in 2011, and that it left only $155 million in reserve funds for the state in 2013, among other criticisms.

But coalition members say 80 percent of corporations doing business in Mississippi paid no state corporate income tax in 2006, 2007 and 2008, citing a January report from the Mississippi Legislature Joint Committee on Performance Evaluation and Expenditure Review. The same report revealed that 81 percent of corporations paid zero state income tax in 2009.

PEER reports that many corporations take advantage of the state's generous assortment of tax credits that allow them to decrease their tax liability up to 50 percent, including a jobs tax credit, a skills training tax credit and a broadband technology tax credit. Other more generous tax incentives include a Growth and Prosperity Program credit, which allows companies that create jobs in high-unemployment areas to enjoy a full state-tax exemption.

The question unanswered in the PEER report is the amount of revenue lost to the state because of the various tax credits.

Anderson said some corporations that touch down in several states may use other methods, such as placing their corporate headquarters in a different state, and then paying employees of their Mississippi subsidiaries through dividends, which are not taxed in Mississippi.

Barbour did not immediately return calls for a response.

Previous Commentsshow

Glad to see the divide-and-conquer effect is starting to wear off and people are starting go after the real culprits. Chop from the top! www.usuncut.org

C_Gibby

Mar 24 2011

So we're upset that corporations used legal tax code measures to reduce their in-state tax liability to 0? "Slap in the face" or not businesses have a primary responsibility to their shareholders, employees, board of directors, whatever, to maximize profit. If they're illegally shift tax burden then yeah, it's an issue, but if they're legally moving the liability to off shore subsidiaries (which tons of multinational corps do) or using other mechanisms, then it's their right, and it's legal. Whether or not it's the socially responsible thing to do is up to each business owner and/or the company's shareholders. Another way to look at it is to inspect the amount that these corporations' employees paid in state tax on their salaries, and that if the companies didn't use this legal workaround, how would it subsequently affect their employment numbers and thus affect the personal state income tax roll. Vicious cycle, perhaps. A very in depth debate could be had here. See y'all at ZDD.

RobbieR

Mar 24 2011

Robbie, you make an excellent argument for closing corporate tax loopholes and raising their taxes. As you note, corporations are wholly amoral organizations that will stop at nothing to maximize profit. As a result, we the people must be equally ruthless in ensuring that they pay their fair share of taxes. Unfortunately, you seem to flirt with the idea that the sociopathic behavior of corporations is actually a moral justification. Of course, it is not. You also suggest that making corporations pay their fair share might cause them to fire employees, depriving the state of tax revenues on those salaries. Thus, requiring corporations to pay taxes might not increase revenues. Call it inverse voodoo economics. That is, there is no point in raising taxes on the wealthy, because that will shift incentives and slow growth such that revenues will not even increase. If that seems like a preposterous caricature of the Laffer curve, that's because it is. Modest increases in taxes above zero will always bring in more revenue. It's just that the increase in revenue is not equivalent to 100 percent of the increase in taxes. It's a matter of diminishing returns, not no returns at all. Such is the sorry state of conservative thought these days.

Brian C Johnson

Mar 24 2011

It isn't just a state problem. GE reported $5.1 billion in profits in the United States in 2010. Its tax bill? Zero. Republicans wail and moan about our high corporate tax rate, but that rate has little to do with what corporations actually pay. Such strategies, as well as changes in tax laws that encouraged some businesses and professionals to file as individuals, have pushed down the corporate share of the nation’s tax receipts — from 30 percent of all federal revenue in the mid-1950s to 6.6 percent in 2009. God forbid we return to those awful 1950s, when the economy shrank year after year under the tyranny of that goddamned communist Eisenhower. Even Ronald Reagan would not support our current revenue lunacy. In the mid-1980s, President Ronald Reagan overhauled the tax system after learning that G.E. — a company for which he had once worked as a commercial pitchman — was among dozens of corporations that had used accounting gamesmanship to avoid paying any taxes. “I didn’t realize things had gotten that far out of line,” Mr. Reagan told the Treasury secretary, Donald T. Regan, according to Mr. Regan’s 1988 memoir. The president supported a change that closed loopholes and required G.E. to pay a far higher effective rate, up to 32.5 percent.

Brian C Johnson

Mar 24 2011

I don't get this. Most corporations, especially in Miss are small affairs consisting of a few owners. The corporations have zero tax liability because the profit is zero. You can take this on up but I would hazard that most corporations pay out 100% of their proceeds to the owners, and while technically the corporation pays no tax, the owners are all taxed on the income received. Comparing federal income tax on multinational corporations to state corporations that do business in one state just doesn't make sense, most small businesses will be incorporated and lumping all corporations together is a terrible way to enhance government revenue. Heck I bet the JFP is incorporated but I would guess Todd and Donna are taking home the revenues after paying themselves and their employees, and the actual reported profit to the IRS is as close to zero as their accountant can make it. Silly headline if you ask me.

GLewis

Mar 24 2011

GLewis I don't believe this article is referring to S-Corps which is what you are referring to by all indications. S-Corps do not pay corporate income tax. Profits must be paid to the shareholders as income which the shareholders do pay personal income tax on or left in the company as retained earnings. Which if I'm not mistaken, the shareholders are still required to pay taxes on even if not drawn down. And I think even small businesses are required to pay corporate taxes on acquired assets. Do you honestly think all the people mentioned in this article such as PEER and various legislators would be complaining about corporations in MS such as S-corps not paying their fair share of corporate income tax when these types of small corporations/businesses due to the way they are setup do not pay corporate income tax? And if you seriously think there aren't enough C-corps in this state to make much of a difference in Mississippi's tax revenue I suggest you look around a little closer. All I know is all the tax incentives and low rates Barbour has pushed for his entire term in office, namely over the last 3 years, has not even put a dent in the state's unemployment rate. This was Barbour's reasoning for his pro-business stance. That by allowing a slew of tax breaks to big busines it would free them up to do more hiring. When will the GOP, the big business Wall Street friendlies, admit that trickle down economics is a figment of their imagination. Worse than that, they know it doesn't trickle down and seems to be exactly the way they prefer it.

HooYoo2say

Mar 25 2011

GL, you're right, by definition an S Corp or an LLC passes profits through to ownership for the purpose of taxation, so essentially the only taxable income would be money spent by the company that was not a direct business expense or write-off. Larger corporations that actually retain earnings from year to year are more likely to be organized as a C Corp, where you could rightfully expect them to pay taxes if they're profitable. So if you said "most" corporations *by number* are S Corps and LLCs, (along with partnerships and LLPs, which would operate largely the same way) you're right. However, when you say this: Comparing federal income tax on multinational corporations to state corporations that do business in one state just doesn't make sense, most small businesses will be incorporated and lumping all corporations together is a terrible way to enhance government revenue. True as far as it goes, but that's not really what's at issue. The question is whether the larger C Corps (with the ability to retain profits year-to-year within the company) are dodging taxation ***while smaller business owners pay their fair share*** because they are taxed on their own returns. For clarification we can go deeper into the PEER report -- the legislators and PEER analysts seem aware of the differences. One of the key items studied was how many "large" corporations in Mississippi paid no state income taxes. According to the PEER report summary we have, 91% of the 130 largest for-profit employers in the state paid no state taxes in 2006; 200 of the 500 companies making over $25 million paid no state taxes; those 200 companies represented $600 million in revenues that went untaxed. Now, what's being argued for here? In terms of how to get Mississippi taxes from those revenues... there's no doubt some of those companies didn't make a taxable profit; but that doesn't mean that some money isn't being left on the table and that there isn't room in the Mississippi tax code to generate some revenue from profits generated at large companies... if the political "will" is there to do it.

Todd Stauffer

Mar 25 2011