Corporate tax loophole gets a look

By Bobby Harrison Daily / NEMS Daily Journal Jackson Bureau

JACKSON – Of Mississippi’s 150 largest for-profit employers, 103 paid no corporate income taxes in 2008-2009.
The information, based on payroll withholdings, was contained in a report compiled by a legislative oversight committee and released last week.
The Legislature’s Committee on Performance Evaluation and Expenditure Review gathered its information from the state Department of Revenue. It also found that 80 percent of companies paid no corporate taxes, though some of those might not have made a profit.
Susan Kennedy of the Alabama Education Association, a previous employee with the Alabama Department of Revenue, said a similar study in her state showed that it was mainly large multinational retailers, such as Wal-Mart and Target, and large fast-food restaurants that paid no corporate income tax.
On the other, she said, smaller state-based companies were paying taxes. That put the small companies at a competitive disadvantage, she said.
“If small businesses find out we are making them pay taxes and letting these people off the hook, they will stone us to death,” said House Appropriations Chair Johnny Stringer, D-Montrose.

Close loopholes
Legislation is expected to be introduced in the House to close the loopholes that allow the large companies to avoid paying corporate taxes.
They avoid paying the 5 percent tax by a complex method that allows them to write off expenses, such as paying rent on their logo, to another out-of-state company where there is no corporate tax.
Closing the loophole could provide needed dollars to deal with the state’s ongoing budget woes. But it also could be viewed as controversial.
House Ways and Means Chair Percy Watson, D-Hattiesburg, held a hearing on the issue last week, but it is unclear whether he will want to tackle what many might label as a tax increase in an election year.
“It is something we will certainly look at,” Watson said. “We will be very deliberative and see if it is something we should discuss.”
Some, such as Reps. John Moore, R-Brandon, and Mark Formby, R-Picayune, questioned the wisdom of placing an additional tax on large employers, perhaps costing the state jobs at a time when many people are having a difficult time finding work.
Formby said it made no sense to deal with the issue while the Legislature is offering tax breaks to lure companies to the state.
“I would like to repeal the corporate tax altogether,” said Moore, adding that such a move would create jobs.
At the Ways and Means hearing, Kennedy said most small Mississippi companies do not pay the 5 percent corporate tax, but instead file individual income tax returns. So small companies would not be affected, she said.
Kennedy said the loophole was closed in Alabama with the support of then-Republican Gov. Bob Riley in 2006. She said a few of the large corporations who use the loopholes to escape paying corporate tax might be manufacturers, but the vast majority are large retailers.
She said many Southern states have acted to close the loophole. Mississippi did in 2001, but apparently the corporations have found a new way to get around it.
Kennedy said that whether or not the loophole is in place, Target will not cede Mississippi to Wal-Mart or vice versa and Lowe’s will not give up the state to Home Depot or vice versa.
“These types of corporations don’t leave,” she said.
“They are in all 50 states. They need the business of Mississippi more than they need this loophole.
“But they will take advantage of this loophole if it is available.”

Contact Bobby Harrison at (601) 353-3119 or bobby.harrison@journalinc.com.