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Mississippi’s Current Corporate Tax Laws are Costing The State Much Needed Revenue

December 7th, 2011

A new study from the Institute on Taxation and Economic Policy (ITEP) and Citizens for Tax Justice (CTJ) compiles profit and state tax data from 265 major corporations operating in the United States.  The report also suggests methods that states can use to improve their corporate tax laws.

The report finds a total of 68 of the 265 companies (all of which earned a profit) paid no state corporate income tax in at least one of the last three years.  It also found that state corporate income taxes have declined significantly as a percent of the whole economy.

• In the last three years, state corporate income taxes were at their lowest level as a percent of the economy since World War II.

In a blog post earlier this year, MEPC reported on some state specific data from the PEER committee about the portion of corporations operating in the state paying zero state income taxes.

• The research showed that approximately 80% of all corporations operating in Mississippi do not pay state corporate income tax.

The PEER data also shows that 70% of the largest corporations (as measured by payroll withholding) do not pay corporate income taxes.

The ITEP report suggests multiple ways that states can improve their corporate tax laws to halt the decline in this vital revenue source and make sure corporations are not able to “shift” income out of state to avoid taxation.  Three of those ways are highlighted below.

• Combined reporting which would require a parent corporation and its subsidiaries to file their income as a whole, limiting its ability to shift income out of state to avoid taxation.
• Decoupling state tax laws from federal tax loopholes which reduce the amount of taxable income corporations have to claim in their state tax filings.
• Increasing accountability and transparency for tax incentives.  Many tax incentives are enacted into law indefinitely but data is not available to lawmakers or the public on the effectiveness of these programs.