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Nathan Newman on March 8, 2007 - 6:11am
Every wonder which corporations are dodging your state corporate income tax? Unfortunately, you usually can't find out since corporations have maneuvered to keep their tax returns secret from the public-- including from state legislators who have to write tax policy without knowing which companies are abusing loopholes to evade paying their fair share of taxes.
That could change in Montana, with approval last week by the state Senate of a bill requiring greater disclosure of corporate income tax information. Senator Jim Elliott, chairman of the Montana Senate Taxation Committee, was outraged to find out that 40% of the top 500 national and multinational businesses in Montana paid under $500 in corporate income taxes, less than most individual Montana taxpayers. Determined to find out what companies were avoiding taxes, Sen. Elliott introduced SB 242 to require publicly-traded corporations to disclose basic tax information, such as how much income they made in the state and taxes paid. As Sen. Elliott recently wrote in his locally distributed column:
There are several valid reasons for shining light into the world of corporate finance, not the least of which is because they do have inordinate political power. If we require financial disclosure of the President, Senators, and Members of Congress, why not require it of the most powerful political force?
The Center on Budget Policy & Priorities just this month released a report, State Corporate Tax Disclosure: The Next Step in Corporate Tax Disclosure, which notes that only the state of Wisconsin presently discloses corporate income tax payments for all individual corporations (and that disclosure is relatively limited and hampered by expensive fees to access the information), while seven states require company-specific disclosure of certain economic development tax breaks. As the report argues, "Company-specific tax disclosure may well be the precondition to meaningful progress in restoring the state corporate income tax to a significant role in financing state services."
While the Montana tax disclosure bill faces an uphill battle in the state House, it should be an example to other states to encourage more transparency in corporate tax disclosure. Missouri has also introduced a bill requiring individual corporations to file annual tax disclosure statements, and we can hope more states will follow.