A new report published Thursday by Center for Effective Government and National People’s Action uncovers how the shrinking corporate tax base is driving critical budget shortfalls and service cuts at the state and federal level. The report outlines exactly how much revenue has been lost due to a precipitous decline in corporate income tax rates and an explosion of loopholes. The report shows that since the recession, corporate income tax revenues have shrunk considerably, despite soaring profits, leaving individuals to pick up the slack.
“Millions of Americans have yet to see any economic recovery,” said George Goehl, Executive Director of National People’s Action. “They’re struggling to find jobs, make ends meet, and provide for their families. This report shows that the revenue needed for recovery didn’t just vanish, it was siphoned off by corporations who refuse to pay their fair share.”
Key takeaways from the study include:
Corporations are paying less in income taxes than they did at the beginning of the recession, leading to vast service cuts.
If corporations paid taxes at Eisenhower administration levels, they would have paid $957 billion last year, $683 billion more than they did; if they had paid taxes at Richard Nixon era levels, they would have paid $738 billion in 2013, $464 billion more than they actually paid.
For context: $200 billion in additional corporate revenue could create 3 million jobs, and just $36 billion could fund 667,000 school teachers, first responders, librarians, highway crews, caretakers of public parks, and other state and city workers.
“Corporations have a responsibility to support the public structures that are an integral part of the national economy and that make their commercial success possible: our legal system; transportation networks; police, fire, and first responders; schools and universities; basic research; and health and safety standards,” said Katherine McFate, president and CEO of the Center for Effective Government. “Instead, as their profits and CEO compensation have soared, they’ve paid lower taxes and contributed a lower share to the federal budget. If we are going to create a future where every American can dream and have a chance to succeed, every corporation needs to step up and pay a fair share of the critical services we all need.”
While the corporate tax base has been eroding for 40 years, as corporations push for lowering rates and opening new loopholes, the report demonstrates the impact this has on states still struggling to recover from the recession. Between 2008 and 2012, corporate tax collections fell in 35 of the 46 states with corporate income taxes. In New York, which is currently facing huge budget shortfalls and a governor bent on shielding corporations from accountability, the state gave away a whopping $11.4 billion in corporate subsidies between 1996 and 2013. Michigan, also infamous for its budget troubles, gave away nearly $7.1 billion during the same period.
To close those gaps, the study concludes that we could raise well over $200 billion in investment capital from corporations by closing loopholes and reducing deductions and special interest tax credits.
The Center for Effective Government works to build an open, accountable government that invests in the common good, protects people and the environment, and advances the national priorities defined by an active, informed citizenry.
National People’s Action is a network of membership organizations working together to advance a racial and economic justice agenda for a new economy and true democracy.