Montana Viewpoint: How $1 billion in sales netted a $50 tax bill

If you ran a multistate business and had just over $1 billion in sales in Montana, I bet you would expect to pay something in Montana corporate taxes. And, indeed you would; you would have to dig deep down into your corporate pocket to come up with $50 to cover your tax bill.

Let me repeat those figures; $1 billion in Montana sales and $50 in taxes. Oh, and for five years in a row. We are not allowed to know its name, but this is a real company. This is a true story.

In a time of record highs in the stock markets, strong corporate after-tax profits and near record low unemployment — in other words, a booming economy — we might be forgiven for wondering why it is so necessary to cut the U. S. corporate tax rate. It’s ours to wonder all we want, but slashing the corporate income tax is nearly a done deal.

The corporate world will hold Congress’ feet to the fire until the rate is lowered. But some corporations, as shown, are already doing pretty good in paying lower taxes. Over the years, as chairman of the Montana Senate Taxation Committee and now as just a regular citizen, I have been interested in the amount of tax specific corporations in Montana actually pay.

Recently I asked the very capable Tax Policy and Research folks at the Montana Department of Revenue to rank the top 500 multistate corporations doing business in Montana by their Montana sales. Then I asked them to list the number of those firms that paid only the minimum tax in 2015, and also how many of them paid only the minimum tax five years in a row, from 2011 to 2015.

They reported that 81 companies with Montana sales between $8.6 million to $1.009 billion dollars had paid only $50 in 2015. More disturbing was that 32 of them paid only the minimum tax for five years running, from 2011-2015 – and 12 of them with sales over $49 million, including one with over $1 billion in 2015 sales.

Nice work if you can get it.

How do they do that? If we could look at their corporate tax returns we might be able to find out, but not even the legislators who write corporate tax law are allowed to know that because it’s private information. So how do the tax writing folks make informed decisions to lower corporate tax without being informed? They base their decisions on gut feelings and lots of encouragement provided by big business.

And that’s a big problem because the people in Congress who want to lower the corporate tax rate from 35 percent to 20 percent like Montana legislators, don’t have a clue as to what the effect would be except a boatload of increased corporate profit and a commensurate amount of less tax money to run the country. That, and a huge bump in the national deficit.

To cushion the blow to the deficit, middle-class taxpayers, what is left of them, will eventually be asked to pay a bit more in taxes. The federal legislators have an unquestionable belief that it will be good for America, and they have a whole bunch of mega business folks who think so, too, not to mention that they happen to give to the politicians’ campaign coffers.

Reasons given for the rate cut are that companies will come back to America and create jobs and pay taxes. If cutting taxes creates jobs, then it’s important to look at the Boeing Aircraft Company.

In 2013, Boeing, which has done business in Washington state for over 100 years, threatened to build its 777X aircraft factory elsewhere if Washington State didn’t give them a tax break. In a panic, Jay Inslee, the Democratic governor of Washington, called the Legislature into a three-day special session — even though they were going to meet in regular session in 60 days — to give Boeing a break, and fast. As a result, the legislature presented the governor—and Boeing—with what is believed to be the largest tax giveaway ever made by any state; $8.7 billion.

And how did Boeing react? By cutting 12,655 jobs in the next four years (LA Times May 2, 2017). That’s not encouraging news for the tax cuts equal jobs argument.

And as far as moving companies back to America, good luck. That would be patriotic, but the only patriotism to America that corporations seem to have is for the American dollar.

Jim Elliott served sixteen years in the Montana Legislature as a state representative and state senator and four years as chairman of the Montana Democratic Party. He lives on his ranch in Trout Creek.