Last week we blogged about a new CBP report, To Have and Have Not, which found that the corporate tax cuts enacted as part of the September and February budget agreements will result in a loss of $2 billion a year, and potentially as much as $2.5 billion a year, in corporate tax revenues – an amount equal to nearly one-quarter of the income tax dollars currently paid by California corporations. The vast majority of the benefits of these tax cuts will go to a handful of large corporations – those with gross incomes over $1 billion.
If not outrageous enough on their own, these tax breaks come at a time when corporate profits have skyrocketed. Total corporate profits reported for tax purposes more than tripled between 2000 and 2007, increasing from $33.9 billion to $122.2 billion, and the average corporation’s profits rose by 154.3 percent, according to the most recent data from the Franchise Tax Board. To put these gains in perspective, consider that if the average personal income taxpayer had experienced a gain comparable to the average corporation’s, that taxpayer’s income would have risen by more than $97,000 between 2000 and 2007. Instead, the average personal income taxpayer’s income increased by just $9,500 (15.0 percent).
Some of the sectors that emerged as big winners due to the recently enacted tax cuts have experienced the greatest growth in profits this decade. Information technology firms will receive the largest tax cut per firm from credit sharing, once fully implemented, and just 28 utility companies will receive tax cuts averaging $1.7 million per firm from the adoption of elective single sales factor apportionment. These cuts come after the average information and communications corporation saw its profits increase fivefold between 2000 and 2007, and the average firm in the transportation, warehousing, and utilities sector saw its profits rise fourfold.
The recently enacted corporate tax cuts come at a time when the share of corporate income paid in taxes is at its lowest level since at least the 1960s. Meanwhile, proposals to close the state’s budget gap largely rely on deep cuts to education, health care, and human services. Where’s the outrage?
— Alissa Anderson