August 6, 2012
How much do Illinois' largest corporations pay in state income taxes?
It's a complex question, but the answer is simple: Nobody knows.
Well, almost nobody. The companies know, but they're not telling. Tax collectors know, but they're not allowed to tell. That leaves the rest of us with just one safe guess: as little as legally possible.
But how much is that?
Maybe it's none of our business. Maybe you agree with Mitt Romney that "corporations are people" and that neither the IRS nor the Illinois Department of Revenue should disclose how much the big multinationals make or pay.
What Illinois tax collectors will tell you, however, is that two-thirds of Illinois corporations pay no income tax. As in zero. Nada.
Granted the majority of nonpayers are small businesses organized under subchapter "S" of the state code. Their profits pass through as income to the owners and are taxed accordingly. No problem there … unless you get annoyed, like I do, at all the doctors and dentists "writing off" the family BMW.
No, the companies I'm curious about are our state's big boys —Boeing Co.,Archer-Daniels-Midland Co.,Baxter International Inc.,Kraft Foods Inc.and our very own bellwether on the way the world is headed,Caterpillar Inc.
The world's leading manufacturer of earthmoving equipment, "Cat," made waves last year when CEO Douglas Oberhelman wrote a letter to Gov. Pat Quinn complaining about the recent hike in state tax rates. "I want to stay here," he wrote from Cat's Peoria headquarters. "But as the leader of this business I have to do what's right for Caterpillar when making decisions about where to invest."
And invest it has, building plants in right-to-work states such as North Carolina, Texas and Indiana, typically after securing millions in state and local taxpayer subsidies — as is routine now in a system that pits state against state, city against city, in a race to the bottom for jobs.
Earlier this year, Cat closed its Canadian locomotive plant in London, Ontario, after unionized employees refused to accept a big pay cut. Currently, 780 union machinists are striking a Cat hydraulics plant in Joliet and may well suffer the same fate.
(Instead of protesting NATO in Grant Park, the Occupy Wall Street kids might have stood with the machinists along Channahon Road. There's the real fight.)
In disputes over wages and benefits, labor and management put their cards face up on the negotiating table. When it comes to taxes, state policymakers are forced to play blind man's bluff. Big corporations have to report how much they pay in state and local taxes on their annual 10-K filings with the federal Securities and Exchange Commission, but they don't have to give state-by-state breakdowns.
So watchdog groups such as the Washington-based Citizens for Tax Justice can tell you that, nationally, from 2008 to 2010, its sampling of half the Fortune 500 companies showed they paid state income taxes equal to only 3 percent of profits, well below Illinois' 7 percent rate. Many paid nothing. But they can't tell you how much, if anything, a Caterpillar or Boeing pays to Illinois. That's unsettling because ever since we switched our corporate formula to the "single sales factor," taxing only profit from sales in Illinois, it would be too easy to finalize sales anyplace but here.
Meanwhile, state officials are constantly being asked to approve this or that tax subsidy so companies will move here — or not move elsewhere. It would be helpful, wouldn't it, if we knew what companies actually pay?
That's why reform groups like Illinois People's Action are getting behind Senate Bill 282. Sponsored by Senate President John Cullerton, D-Chicago, the Illinois Corporate Tax Disclosure and Responsibility Act would require publicly held companies to report in detail their state income tax liability. After two years, the information would be made available to the public.
"We want to make it clear who is paying what," Cullerton said. "Then we can go forward with other reforms to our corporate tax structure."
Then again, this probably isn't one of the reforms Oberhelman had in mind.
Chicago Tribune: Promote corporate tax transparency