New Report: Corporations Paying Historically Low State & Federal Taxes Amid Urgent & Ongoing Needs for Californians

SACRAMENTO — A new report by the California Budget & Policy Center  Why Aren’t Corporations Paying Their Fair Share of Taxes? finds corporations are paying less than half the amount in state taxes, as a share of their income, than they did just four decades ago. This is largely due to state policymakers’ decisions to cut tax rates and expand tax breaks for corporations. 

Findings in the report include:

  • California’s state budget would have received $13.3 billion more revenue in 2018 had corporations paid the same share of their income in taxes that year as they did in 1981   more than the state spends on the University of California, the California State University, and student aid combined.
  • The California Legislature has cut the corporate rate twice since 1980: first from 9.6% to 9.3% in 1987 and from 9.3% to 8.84% in 1997.
  • The corporate tax rate has remained at its current level of 8.84% since 1997.

These state tax breaks for corporations along with the federal Tax Cuts and Jobs Act, signed by President Trump in 2017, which slashed the federal corporate income tax rate from 35% to 21%, mean that corporations are paying much less in taxes than a generation ago. As corporations saw the largest one-time corporate income tax rate reduction in US history, economic disparities only widened for California workers, families, and households. The pandemic and recession have only deepened the economic needs of Californians in low-income households as well as highlighted why California must prioritize long-term investments in public health and employment, housing and infrastructure needs, and the state’s water and climate crisis.

“Policymakers can reduce spending on tax breaks for corporations and big businesses now, and in turn provide the state more ongoing resources that are needed to support California families with low incomes, as well as services we all rely upon, beyond this 2021-22 budget,” said Jonathan Kaplan, a senior policy analyst with the Budget Center and author of the report. 

Policymakers have an opportunity to better position the state and its people for greater and more equitable economic growth by evaluating the ongoing tax breaks and reduced tax rates that corporations have received for decades and consider that most pandemic-related relief for Californians has been one-time. The governor’s fiscal outlook and other economic forecasts expect Californians to gain back jobs slowly, with the total number of jobs in the state not returning to pre-pandemic levels until 2025. This heightens the need for state leaders to plan for long-term revenue that can help people who are working but still struggling to make ends meet and to make investments that help ensure that all businesses and Californians can thrive.

Read the full report here: https://calbudgetcenter.org/resources/why-arent-large-corporations-paying-their-fair-share-of-taxes/

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The California Budget & Policy Center engages in independent fiscal and policy analysis and public education with the goal of improving public policies affecting the economic and social well-being of Californians with low and middle incomes. Support for the Budget Center comes from foundation grants, subscriptions, and individual contributions.