BILL MINOR: Corporate income tax avoiders attract legislative interest

By Bill Minor

JACKSON – Can you believe that 80 percent of the 150 largest corporations in Mississippi pay no corporate income tax to the state? Well, believe it.
That’s what Legislative PEER committee staffers found when asked by House Education Committee chairman Cecil Brown, the Jackson Democrat, to find the answers to several specific questions regarding corporate income taxes paid by top for-profit employers.
Brown brought the PEER responses to two House committees desperately striving to find additional revenue to ward off deep cuts in the Adequate Education Program, the state’s basic funding program for public education. The Jackson lawmaker got assistance from an Alabama tax attorney hired by the Alabama Education Association who successfully got lawmakers to close some corporate tax loopholes in that state.
PEER staffers, using information provided by the Department of Revenue (what we call the State Tax Commission) reported that in 2006 of 130 top corporations 91 paid no corporate income tax, and that in 2007, 2008 and 2009, zero corporate income tax was paid by 103 of the largest 150 employers.
Asked by Brown to give the percentage of income taxes paid by “C” corporations (standard public corporations) and limited liability entities (LLEs), PEER reported that 85 percent was paid by C corporations and only 0.37 percent by the LLEs. The remainder of corporate tax collections came from composite returns and certain insurance companies, PEER said.
“What this seems to indicate is that the bigger corporations are able to hire top lobbyists and tax experts to find loopholes in the law and avoid having to pay income tax, while the small mom and pop corporations can’t afford specialists to get around paying the tax,” said Brown.
Unlike many states which have a separate – and higher – income tax rate for corporations as compared to the income tax rate for individuals, Mississippi taxes both at the same rate. Consequently, corporations pay no higher rate than 5 percent on their net income after deductions.
Of note, as shown by the annual report of the State Tax Commission, 70 percent of all income taxes collected in Mississippi are paid by individuals. (In pointing out the imbalance in the Egyptian tax system under President Mubarak during the uprising in Egypt, commentators cited the fact that businesses were taxed at the same 10 percent rate as individuals).
The Legislature sought to close some corporate income tax loopholes in recent years, Brown said, “but it looks as though the tax people for the big companies were too clever for us.”
Meantime, officials at the State Tax Commission informed Brown and other key lawmakers that it has gone after some of the tax-avoiding corporations and currently has three lawsuits underway seeking to plug loopholes. “The Tax Commission has asked us to hold off until next year changing the corporate income tax laws,” the Jackson lawmaker said. “Therefore, we will respect their wishes and see if they are successful in court to tighten the laws.”
The PEER staffers pointed out in their memo that Mississippi’s tax rates are lower than many other states, and that while several states have a zero corporate tax, others such as Iowa and Pennsylvania have a rate of 9 percent plus. One index, the memo said, ranks Mississippi as the 13th most favorable tax system for business, compared to Alabama at 24th, Louisiana 19th and Arkansas 40th.

Columnist Bill Minor of Jackson has covered Mississippi politics since 1947. Contact him through Ed Inman at edinman@earthlink.net.