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Corporations aren’t paying fair share in taxes according to an Economic Policy Institute report

Illinois lawmaker Rep. Will Guzzardi is calling on the legislature to tighten up tax loopholes...
Illinois lawmaker Rep. Will Guzzardi is calling on the legislature to tighten up tax loopholes for large corporations like Amazon.(WGEM)
Published: Apr. 14, 2022 at 5:10 PM CDT
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SPRINGFIELD (WGEM) - You see the money come out of every paycheck that pays your income taxes, but a nationwide oversight agency is reporting that corporations often aren’t paying their fair share.

The Economic Policy Institute, along with Illinois, Connecticut, Wisconsin, Florida, Michigan, Tennessee, and Colorado are calling for reforms in their state governments to get corporations, especially large ones like Amazon and Comcast, to pay their share of the taxes.

Nationwide, the institute argued the lack of corporate tax income created a revenue shortfall of $43 to $57 billion between 1989 and 2017.

Tax revenues are critical to the ability of state and local governments to provide basic services to their residents. However, in recent decades state and local policymakers have consistently allowed corporations to reduce their share of taxes,” report author and EPI Director of Research Josh Bivens said. “These policy decisions should be reversed to ensure profitable businesses pay their fair share in taxes.”

That money, local legislators argue, could be used for social services in their states like education and early childhood support in Illinois.

The report from EPI does not mention any corporations by name. In separate statements from legislators nationwide, they called out large corporations in their states, including Amazon’s presence in Illinois.

A spokesperson for Amazon provided the following statement.

“We look forward to continuing conversations with local officials and members of the community to answer questions,” they said. “We also give back through donations and volunteer events throughout the year, and we’re continuing to try and do more to support the many communities that are excited to work with us.”

Additionally, the online retailer said they’ve invested over $14 billion in the state of Illinois, and that they’ve provided more than 43,000 jobs to the state.

Who’s paying, who isn’t

According to Guzzardi and the EPI, state tax income isn’t clear where it comes from. The federal agency that takes in all the state tax data only asks for the gross amount of state taxes, not where they’re sourced from.

Most states also don’t require corporations to disclose detailed information, so it isn’t clear how they find tax loopholes to avoid certain payments.

What is known is the EPI shows that 69% of Illinois corporations paid nothing in corporate income taxes from 2017 to 2019. Of that 69%, 17% had over a billion dollars in federal taxable income, as shown in the chart above.

Guzzardi is calling on other lawmakers to require more transparency for corporations in how they do their taxes so that they can close the loopholes that he believes they exploit.

“We figure out how [they’re] dodging our taxes and we start closing the loopholes and changing the laws to make sure these wealthy individuals and these hugely profitable corporations are in fact paying their fair share,” he said.

How are taxes getting avoided?

Exactly how they avoid the taxes isn’t clear, which is part of the reform and change Rep. Will Guzzardi (D - Chicago) is asking for the General Assembly to take up.

One theory on how these corporations avoid taxes is because of their legal distinction. There are different types of corporations that are taxed differently. To keep it simple, in recent decades there has been a rise in corporations where profits are spread out amongst board members and stakeholders, instead of kept by the company. Those profits are then taxed for their personal income instead of the corporations’ income.

It isn’t a matter of companies not being able to afford the taxes. Data shows that profits have increased in the past few years, especially with the rise in online retail during the pandemic. Amazon, which has multiple warehouses in Illinois, was the target of criticism by Guzzardi.

“Those folks at those corporations are shielding their wealth and enormous fortunes so that our state government can’t collect tax on them to provide the basic services that our families need,” he said.

How it affects states

The report argues that the shortfall of revenue from the decline in corporate taxes has contributed to reduced spending by states on programs. For every one dollar in lost revenue from corporate taxes, there is 88 cents less spent on government programs. As mentioned previously, EPI estimates a national $43-$57 billion shortfall in corporate tax revenue.

Lawmakers from state legislatures nationwide want a fair share of corporate taxes to be put towards programs to help the people of their states. In Illinois, Guzzardi and other Chicago leaders were calling for “babies” to be put ahead of Bezos, in reference to former Amazon CEO and billionaire Jeffrey Bezos.

“If corporations paid their fair share, we can take care of our communities more,” said Chicago childcare worker Tosha Rushton-Kelly. “It’s not fair that I’m paying my taxes but they aren’t paying any. I know these big corporations can afford to pay what they owe.”

The shortfall has not been recovered using other areas of revenue.

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