New Report Shows Major Corporations Based in Wisconsin Pay Little in State Income Tax
A number of large, profitable corporations in Wisconsin pay little or nothing in state corporate income tax, according to a new report. Loopholes, tax credits, and creating accounting keep the amount these corporations pay in income tax to a minimum.
A study by the Institute on Taxation and Economic Policy and Citizens for Tax Justice examined 269 Fortune 500 companies that were profitable every year between 2008 and 2012. Six companies based in Wisconsin were on that list, and those six companies all paid less than five percent of their income in income tax. The corporate income tax rate in Wisconsin is 7.9%.
Here are the Wisconsin corporations included in the report, and the share of income they paid in state income tax over the last five years:
- Rockwell Automation, based in Milwaukee: -1.0%
- Harley-Davidson, based in Milwaukee: 1.4%
- Joy Global, based in Milwaukee: 2.2%
- Bemis, based in Sheboygan Falls: 3.0%
- Kohl’s, based in Menomonee Falls: 3.6%
- Fiserve, based in Brookfield: 4.3%
How can a profitable corporation so significantly drive down its tax rate, sometimes to the point where it pays a negative tax rate? While the situation of each corporation is different, the report offers a few insights:
- Generous tax incentives states grant to corporations shrink or eliminate state corporate income tax liability. One study shows that tax incentives, most of them tax credits, offset 30% of corporate tax liability in selected states in 1998, up from 10% in 1990.
- Corporate tax shelters allow companies to shift profits on paper to states with no corporate income tax, regardless of where those profits were earned.
- A steady stream of corporate tax cuts passed at the federal level has cut state taxes as well. Most states use federal income definitions as a starting point in calculating their own corporate tax base. Unless states “unlink” from the federal tax changes, they can see their own corporate tax base shrink when changes are made at the federal level.
Many corporations aren’t paying much in state corporate income taxes, and a recent report shows that many corporations aren’t paying much in federal taxes either. (“New Study Finds Large Number of the Major, Profitable Corporations Pay Little in Corporate Taxes,” on February 27th.) The bottom line is that too many corporations are able to avoid paying the taxes that support the basics that all businesses need – things like good roads, safe communities, and a health, well-educated workforce.
Governor Walker has made tax cuts a priority of his administration, on the grounds that lower taxes will result in a more favorable businesses climate. But this report shows that many large companies based in Wisconsin already pay very little in income tax, and sometimes none at all.