Corporate Taxes are Being Eroded by Tax Incentives and Tax Avoidance Measures
April 20th, 2012
In the final part of our series about tax day, we will explore how corporate tax loopholes and corporate tax incentives have eroded corporate taxes and jeopardize the public services that make our economy strong.
Much of the tax day attention is usually paid to individual income taxes. However, individuals and corporations alike benefit from our state’s infrastructure, education systems, court systems, and other state services that make Mississippi’s economy strong. Thus, corporations should also pay taxes maintain those investments. However, last year PEER found that 8 out of 10 corporations in Mississippi pay no state income tax. Some of those corporations do not pay income tax because they legitimately have no profit to pay taxes on or they receive credits that have lowered their taxes to zero. Others are not paying taxes by taking advantage of tax avoidance measures.
Corporate Tax Breaks
Corporate tax breaks are programs that allow corporations to reduce or eliminate their taxes. These programs are designed to encourage business activity, but their benefits can be offset by reducing state revenue and limiting investment in state services like education and workforce development that are also vital to the economy.
Furthermore, the true benefits of corporate tax incentive programs are unclear. Public disclosure about the programs is lacking. In most cases the public does not even know simple details about the incentives such as or how many corporations are receiving the incentives and how much they cost. More importantly, data are not available on how many jobs are actually created from the programs and the quality of those jobs.
At the very least, MS should publish information on which companies are receiving tax breaks and whether or not the policies are have the intended impact on jobs.
Corporate Tax Loopholes and Tax Avoidance
Another ways corporations avoid paying taxes is by taking advantage of loopholes in the tax code. Corporations employ tax avoidance measures like shifting income to related corporations in other states. More details about how corporations do this can be found in this blog post.
Closing loopholes would not only help support our state services, it would help level the playing field for local businesses that don’t have out of state subsidiaries and must pay taxes on their full profit.
Corporations succeed when they are surrounded by an educated workforce and a well-functioning infrastructure – both of which require public investment funded by taxes and remain essential building blocks of a well-functioning economy.
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