California's major corporations have rung up hundreds of billions of dollars in profits in recent years, but have paid only a few percentage points of those profits in income taxes here and in other states, according to a new nationwide study by several liberal organizations.
The compilation of corporate profits and state taxes was conducted by the Institution on Taxation and Economic Policy and Citizens for Tax Justice and released in California by the California Public Interest Research Group.
It covered 265 of the Fortune 500 corporations that reported profits for three straight years, 2008-2010, including 33 based in California.
Nationwide, the 265 firms had a combined $1.33 trillion in profits during the three-year period but on average, paid just 3 percent of those earnings in state corporate income taxes.
The 33 California corporations' tax bills ranged from minus-1.5 percent (McKesson Corp.) to 8 percent (Apple). The California corporation with the largest profits during the period, Wells Fargo Bank at $49.7 billion, paid $344 million or 0.7 percent in state taxes. Second-place Intel Corp., with $23.3 billion in profits paid no state income taxes, the study found.
In dollar terms, Chevron Corp. had the highest state tax bill, paying $1.1 billion or 5.8 percent of its $18.6 billion in profits over the three years.
Although the sponsors of the corporate tax study call it "corporate tax dodging," they don't allege that the companies did anything illegal. Rather, they took advantage of various state writeoffs, many of which reflected federal tax law, to minimize their state tax bills.
"Thanks to their armies of accountants, paying taxes has become optional for some of the most profitable corporations in the world," said Pedro Morillas, CALPIRG's legislative director. "And that leaves small businesses and individual taxpayers to pick up the tab."
State corporate taxes in California run just under $10 billion a year and the Legislature's budget analyst says that even with economic recovery, they're unlikely to rebound quickly because "businesses will be more able to use new or previously earned state tax credits (such as research and development or enterprise zone credits) to reduce taxes owed."