From New Jersey progressive groups last spring to the current election season, the call for corporations and large businesses to “pay their fair share” in taxes remains a perennial refrain.
But few business blamers actually look at or explain what the largest employers already do pay in taxes.
A report released this year by the Council on State Taxation (COST), however, shows how the ever-present “fair share” mantra rings hollow.
It’s called: “Wearing Blinders in the Debate Over Business’s ‘Fair Share’ of State Taxes,” and is authored by Karl A. Frieden, vice president and general counsel for COST.
“This report isn’t about politics or ideology, it’s simply about facts, data and context,” said NJBIA Chief Government Affairs Officer Christopher Emigholz, who regularly takes part in COST panels around nation.
“If anyone blames how corporations are taxed on the ills of the economy or inflation, they either don’t know the actual data or they’re willfully ignoring it in order to scapegoat job creators. That’s why this report is so important and is a must-read for anyone who has an interest in tax policy.”
Some top line numbers from the COST report:
- Businesses paid more than $1.07 trillion in U.S. state and local taxes in FY22, an increase of 13.7% from FY21.
- In FY22, business tax revenue accounted for 44.6% of all state and local tax revenue.
- Corporate income tax revenue has increased by 100% over the last four years.
- The business share of SALT nationally has been within approximately 1% of 44% since FY03.
The COST report postulates from the point of view of four well-respected state and local tax experts who have established themselves as the leading progressive voices on SALT policy, and that businesses underpay taxes.
But Frieden presents the opposing point of view through multiple data points and resources.
“(Their) perspective that the design of total state and local taxes is tilted in favor of business is demonstrably false,” Frieden writes. “In fact, quite the opposite is true: business pays significantly more sales and excise tax on business inputs and property tax on business property than it would under optimal or neutral tax designs.
“Together, the business overpayment of sales, excise, and property taxes likely exceeds even the (progressive tax experts’) worst-case scenario of underpayment of corporate income tax by margins of 15-to-1 at the low end or 21-to-1 at the high end.”
Regarding New Jersey’s sky-high tax burden, Emigholz explained in a New Jersey Globe op-ed earlier this year that the “myopic mantra of holding corporations accountable to pay their fair share” ignores the fact that New Jersey corporations now pay 45.3% of the total tax burden in state, while businesses elsewhere collectively pay about 40% of their state’s tax burden.
Further, New Jersey businesses collectively paid $34.1 billion in state and local taxes in FY22. The state’s largest employers now also have the highest corporate business tax rate in the nation at 11.5%.
Nationally, Frieden concludes that progressive calls for more taxes on business often creates a “good guys” vs. “bad guys” scenario and “they try to occupy the high moral ground by focusing on tax design issues in the corporate income tax, and then ignoring, rationalizing, belittling, or misstating tax design issues and outcomes regarding other state and local taxes that disfavor business.”
“The conclusion is inescapable that (progressives) are not really interested in business paying its ‘fair share’ of state and local taxes, but in business paying “more” in state and local taxes,” Frieden said.
To see the full COST report, click here.
