We retired Tax Justice Blog in April 2017. For new content on issues related to tax justice, go to www.justtaxesblog.org
The state corporate tax study Citizens for Tax Justie and the Institute on Taxation and Economic Policy released today shows that three very profitable Fortune 500 companies headquartered in Indiana paid an effective corporate income tax rate ranging from just 0.4 to 1.5 percent over the last five years. Eli Lilly, NiSource, and WellPoint earned a total of over $35 billion in profits between 2008 and 2012, but thanks to a variety of tax avoidance techniques none of these companies even came close to paying the statutory 8.5 percent rate that was in effect in Indiana for most of this five-year period. Despite this fact, Indiana lawmakers inexplicably decided last week to enact yet another corporate income tax rate cut, as well as a property tax break for business equipment.
Less than three years ago, former Governor Mitch Daniels signed into law a bill gradually lowering the state’s corporate tax rate from 8.5 percent to 6.5 percent. The final stage of that tax cut is still over a year away, and yet Governor Pence says he’s “pleased” with the fact that the current legislature just sent him another corporate tax bill that will eventually lower the rate to 4.9 percent. The Institute on Taxation and Economic Policy (ITEP), notes: “When some of Indiana’s most successful corporations are paying such a small fraction of their profits in state income taxes to states around the country, it raises serious questions about whether reducing the corporate income tax is a worthwhile priority.”
But this corporate tax rate cut isn’t the only giveaway for big business that Governor Mike Pence will soon be signing into law. The same legislation containing the corporate tax rate cut also grants localities the option to begin a race-to-the-bottom by eliminating their property taxes on new business equipment. A report (PDF) from the Indiana Fiscal Policy Institute explains that giving localities this option is unlikely to draw any new businesses into the state, though it may reshuffle existing businesses around within the state’s borders. And the president of the Institute explains that “I’m a little worried about the nature of allowing local governments to adopt this when some counties depend so much on business personal property tax and some don’t.”
Indiana’s largest and most successful companies already enjoy a shockingly low tax rate, and that rate is about to get a lot lower. Hopefully next session lawmakers will turn their attention toward initiatives that could actually benefit ordinary Indiana residents—like improving the state’s education system and infrastructure.