Corporate Tax Dodge Findings Show Need for Reforms in Washington State
Now that we know nine major corporations with operations in Washington state paid zero or less in federal corporate income taxes in recent years despite reaping huge profits, serious questions arise as to whether these corporations or others are dodging Washington state taxes too.
Washingtonians could get answers if the Senate acts to approve HB 2201, a measure that would significantly improve tax break transparency and corporate accountability. Although this measure was approved by the House on February 18, it hasn’t even been scheduled for a public hearing in the Senate.
The federal tax information comes from a new report, released by the Institute on Taxation and Economic Policy and Citizens for Tax Justice. It found that 111 large corporations in the U.S. paid no federal corporate income taxes in at least one year between 2008 and 2012. Many of them actually received sizable tax refunds during the years in which they paid no taxes, despite making enormous profits.
At least nine of the 111 corporate tax dodgers have activities in Washington state (see table). They are Boeing, CenturyLink, Domtar, Facebook, H.J. Heinz, Honeywell International, Paccar, Praxair, and Yahoo. Highlights from the report include:
- Boeing – the recent recipient of the largest state tax subsidy in US history – paid no federal corporate income taxes in all five years examined in the study. The company received $822 million in refunds despite nearly $15 billion in profits during this period.
- Paccar, a multinational technology company based in Washington state, paid no taxes in three of the four years examined, while making $775 million in profits.
- Honeywell International received refunds amounting to $510 million over two profitable years.
Is it happening here?
Are these corporations avoiding Washington state taxes too? It is impossible to know because almost all company-specific tax information is confidential under state law.
The limited information that is publicly available reveals that six of the nine federal corporate tax dodgers identified in the report have also claimed tax breaks in Washington state recently (see table). For example, Yahoo, which paid no federal corporate income taxes in one of the years examined in the study, got $252,000 from claiming a wasteful Washington state tax break for research and development activities.
Yahoo and the other companies listed in the table might be claiming many more state tax breaks or engaging in other tax avoidance strategies in Washington state. But without reforms lawmakers and the public will remain in the dark about whether corporations are adequately supporting the health, education, public safety, and other investments that benefit their workers and shareholders.
Corporate transparency reforms needed
House Bill 2201 would shed much-needed light on individual corporations’ tax payments in Washington state. Among other things (detailed here and here), the measure would require all large, publicly-traded corporations operating in Washington state that claim more than $10,000 per year in state tax breaks to disclose information about their state business and occupation (B&O) tax payments, including:
- All income generated in Washington state subject to the B&O tax;
- The amounts claimed in preferential B&O tax rates, tax credits, and certain other tax breaks; and
- Bottom-line tax payments.
Approval of HB 2201 would provide lawmakers and the public with basic information essential for more reasoned decisions about tax and spending policies in the years ahead.