A George Mason University professor named John Petersen wrote a column for Governing Magazine this month that underscores what we've been saying on these pages for years about the clever ways many of our corporations have found to avoid paying their fair share of taxes.

Indeed, Petersen points out, years ago when he was a young economist he became aware that commercial banks had a particularly unique opportunity to legally avoid paying any federal corporate income taxes whatsoever.

"I asked a senior banker why his bank continued to pay what could have been so easily avoided. His answer had to do with the notion of one's 'fair share' and an obligation the bank had to its shareholders to avoid being seen as taking undue advantage of tax loopholes," he wrote.

Alas, that's no longer the case.

"Now, the received wisdom is that corporations and businesses owe it to their stockholders to minimize taxes by whatever means they can," he added. "Rather than avoiding censure for not doing their share in supporting government, tax minimization and tax avoidance have become part of a corporate profit center."

Here in Wisconsin, as reporter Mike Ivey detailed in an award-winning series last year, most of the big banks get around paying state taxes by assigning their profit centers to a state like Nevada, for example, where there is no income tax, and keeping their loss leaders here.

In those old days that Petersen was talking about, revelations like that would have caused outrage among public officials, and legislators would have rushed to do something about it.

No more, though. Nearly a full year later, the practice continues, and there's no serious attempt to do anything about it. The corporate argument that in a perfect world businesses shouldn't pay taxes at all has been swallowed by the majority of lawmakers. And, consequently, individual income taxpayers pick up more and more of the total tax load.

But, as Petersen commented in the same Governing article, "If there is an individual income tax, there needs to be one on corporate income as well, simply to avoid vast accumulations of wealth occurring outside of the tax system."

He added that accumulation of wealth becomes even more likely with the pending demise of the estate tax at all levels.

"As my banker friend pointed out years ago, some ways of minimizing taxes might benefit a privileged few, but prove unacceptable to a majority that are not so materially blessed," he concluded.

Copyright 2003 The Capital Times

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