An overlooked source of revenue?
Faced with growing budget deficit partially of its own making, the Corbett administration likely will retreat from its previously planned 3.7 percent increase in state spending this election year and move instead to cut about $800 million from its tentative budget proposal.
It's not yet known whether that will mean a reversal of the governor's plan to restore some of the education cuts from his first three years in office. It is virtually certain that the governor will not seek to increase revenue, however.
Gov. Tom Corbett and legislators should take a new look at a corporate taxation study that was issued in March, where they might find tax revenue hiding in plain sight.
The Institute on Taxation and Economic Policy and Citizens for Tax Justice conducted the nationwide study of corporate tax avoidance. They looked at 269 Fortune 500 companies, including 16 based in Pennsylvania, that were profitable every year from 2008 through 2012. Among those, 90 avoided paying any state corporate income taxes in at least one year, 38 avoided doing so in at least two years and the total state tax avoidance for all of the companies over the period was $73.1 billion.
Pennsylvania's corporate tax rate is 9.9 percent, among the highest in the country. Nationally the average rate is about 6.25 percent. The 269 companies in the study paid an average of 3.06 percent over the period studied.
Average rates over the five years for the Pennsylvania companies in the study: PPL and PNC Financial Services Group, 1 percent; Cigna, Airgas, H.J. Heinz, Allegheny Technologies and Air Products and Chemicals, between 1 and 2 percent; Wesco International and AmerisourceBergen, between 2.1 and 3 percent; Consol Energy, Hershey Foods and Comcast, between 3.1 and 4 percent; PPG Industries, Dick's Sporting Goods and Universal Health Services, between 4.1 and 5 percent, and UGI, 6 percent.
There is no single path by which the companies reduced their state tax bills. Some have received individual deals in the name of job creation, though most states have no way to track whether the agreements actually produce jobs.
All benefit from the way taxes are calculated. Their state bills are based on the calculation of their federal returns, so every federal corporate tax break they receive also diminishes their state tax liability.
Nationwide, the percentage of state tax revenue from corporate sources steadily has eroded. In 1986, according to the report, state corporate tax revenue accounted for 0.5 percent of gross state product nationwide, a measure of all state economic activity. In 2011, it was 0.33 percent.
All companies strive to diminish their tax bills as part of doing business. State lawmakers everywhere should ensure that those corporations contribute something to the cost of operating the state government.