Cheating the Schoolkids: Corporations Don't Pay Their State Taxes, Either

An Apple executive recently said, "The U.S. has stopped producing people with the skills we need."

It's hard for a nation to build work skills when its corporations, the beneficiaries of a half-century of public support, have largely stopped paying for education.

Most of the attention to corporate tax avoidance is directed at the nonpayment of federal taxes. But state taxes, which to a much greater extent fund K-12 education, are avoided at a stunning rate by America's biggest companies. As a result, public school funding continues to be cut, and the worsening performance of neglected schools adds fuel to the reckless demands for privatization. Inner-city schools are being devastated by this insidious process.

Chronic Nonpayment

A 2011 report by Citizens for Tax Justice (CTJ) showed that corporations pay less than half of their required state taxes, which in addition to K-12 educational funding provide a significant part of pension funding. More recently, the reportThe Disappearing Corporate Tax Base found that the percentage of corporate profits paid as state income taxes has dropped from 7 percent in 1980 to about 3 percent today.

It may be getting worse. A PayUpNow analysis of 25 of our nation's largest corporations shows a total state tax payment of 2.4%, about a third of the required tax, based on the average maximum state tax rate of 7.3%. Among them were:

*Boeing, which paid zero federal taxes last year, and about 1/50 of its required state taxes.
*Caterpillar, which paid less than a quarter of its tax bill after recently threatening to leave Illinois. Rand Paul said Caterpillar should get "an award" for saving money.
*Verizon, which paid about one-tenth of its required tax. A company spokesman recently said, "Verizon fully complies with all tax laws and pays its fair share of taxes."
*Google, which paid less than a quarter of its state tax bill. Referring to tax havens, Google Chairman Eric Schmidt said, "I am very proud of the structure that we set up."

Starving the Public Schools

As a result of the decline in state tax money, education gets cut. Overall spending on K-12 public school students fell in 2011 for the first time since the Census Bureau began keeping records over three decades ago. The cuts havecontinued to the present day.

Games Corporations Play to Take Our Education Funding

A Good Jobs First report describes how companies play one state against another, holding their home states hostage for tax breaks under the threat of bolting to other states. Incompetent or complicit governors simply play along.

A related report explains the personal income tax (PIT) subsidy, through which employers simply take the state tax paid by their workers. States are pressured into such agreements to keep corporations from moving out. Employees, as a result, are effectively "paying taxes to the boss."

Americans Suffering Everywhere

The effects of state tax avoidance are seen all around the country, with impacts on schools and pensions and housing. Illinois, perhaps the most financially troubled of all states, cut education spending per student by a greater percentage than any other state in 2012, and in 2013 it was third-worst in cuts per student. As Illinois was shutting down 50 public schools last year, 12 of the state's largest corporations were paying about a third of their required state taxes.

In Pennsylvania, which, according to the CTJ report, received less than a third of its required state taxes, schools and parents sued the state for failing to provide the resources needed for public education. In Kansas, Governor Sam Brownback proposed to cut pensions to compensate for lost revenue from corporate tax cuts. And in California, where Apple dodges state taxes by declaring itself a Nevada resident, and where Cisco paid less than half of its required state taxes over the past three years, no money was available to house San Jose's homeless residents.

Hypocrisy: Taking without Paying

In Brown vs. the Board of Education (1954) Chief Justice Earl Warren said: "Education is perhaps the most important function of state and local governments. It...is a right which must be made available to all.."

Education in the 1950s and beyond trained the engineers and medical specialists and mathematicians who built our technology and health care and financial industries. But with the help of failed government, corporations are doing whatever they can to avoid the responsibility of sustaining our public school system. They are starving the children instead.