Protests from major North Carolina manufacturers that tax reform would cost jobs fly in the face of those companies' actions in other states, a new study released this morning by the Center on Budget and Policy Priorities shows. Despite their objections to "combined reporting," a reform that would close important tax loopholes, the vast majority of the state's major manufacturers have adapted to combined reporting-based income taxes in other states.
Combined reporting is a fundamental reform needed to ensure that multistate corporations pay their fair share of the North Carolina corporate income tax, just as small North Carolina businesses must do.
"This important new study shows that tax fairness doesn't undermine job creation," said Elaine Mejia, director of the North Carolina Justice Center's Budget & Tax Center. "The companies arguing that combined reporting would cost jobs in North Carolina are the same companies proving otherwise across the nation."
Since most large companies consist of a parent corporation and its subsidiaries, big corporations can artificially move profits out of the states in which they are earned, reducing or even eliminating tax liability in places like North Carolina. Corporations have argued that combined reporting would halt job creation. Yet more than two-thirds of the state's largest manufacturers do business in combined reporting states, many of them in multiple such states.
" Combined reporting would close tax loopholes that harm North Carolina's fiscal health tremendously," said Mejia. "Not only would tax reform increase state revenue, it would make costly litigation unnecessary."
Previously, North Carolina was forced to take a case all the way to the U.S. Supreme Court to shut down an abusive tax shelter put in place by The Limited. Currently, the state is engaged in similar litigation involving Wal-Mart. If combined reporting had been mandatory, these costly court cases would have been unnecessary.
A wealth of data show that combined reporting has not harmed these businesses in other states. Among the report's key findings:
- 60 of the 75 largest North Carolina manufacturers have chosen to maintain facilities in at least one combined reporting state.
- Almost half have facilities in 5 or more CR states, 16 have facilities in 10 or more, and 1 has facilities in every one of the CR states.
- 18 have long-maintained their headquarters in CR states, including Cisco Systems, Freightliner, and Georgia-Pacific.
- Several opponents of CR have facilities in numerous CR states, including Smithfield and Baxter Healthcare.
The report is available online at http://www.cbpp.org/1-15-09sfp.htm
For more information, contact: Elaine Mejia, BTC project director, 912.856.2176; Jeff Shaw, Director of Communications, NC Justice Center, (919) 863-2402; Shannon Spillane, Center on Budget and Policy Priorities, 202.408.1080.