OPINION
By April 15, millions of Americans will have dutifully filed their tax returns, upholding what is widely regarded as a civic responsibility. More than 9 in 10 American taxpayers agree on this obligation to pay their fair share of taxes – a rare consensus in our polarized society.
But one group lacks this sense of duty and fairness when it comes to paying taxes: giant corporations. While everyday Americans strive to meet their tax obligations, corporate behemoths like Nike and FedEx continually find ways to contribute less in taxes to the public services we all rely on despite earning record profits for their executives and shareholders.
Luckily, New Jersey is taking a step in the right direction with Governor Murphy’s proposal to reverse a corporate tax cut for companies doing business in the state that make over $10 million in annual profits. The Corporate Transit Fee would use the money to bolster New Jersey’s financially-strapped public transit system, which serves as a vital lifeline for those very corporations by moving people to and from work, school, doctor’s offices, and grocery stores.
Based on the laments of the big business lobby, you might think corporations pay high taxes relative to you and me. But you would be wrong. Despite record-breaking profits, many of the world’s most lucrative businesses pay a lower tax rate than the average household.
In New Jersey, the average tax rate for individuals paying federal taxes is over 16 percent. Meanwhile, over the past five years, companies like AT&T (2.6%), Bank of America (3.8%), and Citigroup (4.3%) have managed to pay federal corporate tax rates far below that. Keep in mind, these are taxes paid only on profits for corporations, while taxes paid by individuals are based on income before other expenses. Such corporations as Amazon and ExxonMobil have avoided paying taxes entirely in some years by reporting losses thanks to artificially-lowered profits.
These low corporate tax rates stem from a complex network of tax avoidance strategies orchestrated by armies of lawyers and accountants. These strategies enable corporations to shirk their fair share of taxes while hoarding wealth for shareholders and executives. The disparity is so pronounced that many corporations end up with a negative tax rate – actually getting refunds from the government despite hefty profits.
Over the past decades, large multinational corporations have aggressively pursued all avenues to avoid or reduce their tax responsibilities, including further tax cuts during the Trump administration. Yet the trickle-down story sold to justify these cuts has not come to pass. Instead, nearly all the benefits went to already-wealthy executives and stockholders, not the working people whose labor generates the profits. And at the same time that corporate profits have been skyrocketing, New Jersey Transit and other critical public infrastructure programs have faced decades of disinvestment and stagnant funding.
New Jerseyans recognize this basic injustice, overwhelmingly opposing the recent expiration of a Corporate Business Tax surcharge – by a nearly 2-to-1 margin – on profitable corporations to help pay for NJ Transit. That opinion about low corporate tax rates aligns with national attitudes: A Pew Research poll in 2023 found 8 in 10 Americans agreed it frustrates them that some corporations and wealthy people don’t pay their fair share.
Holding corporations accountable to pay their fair share doesn’t end with the Corporate Transit Fee, which still results in a tax cut for thousands of corporations. Even bringing back the full corporate surtax won’t counteract corporations that hide their profits overseas. States must challenge decades-long corporate tax avoidance and claw back more of those record profits to invest in core infrastructure that helps people and communities thrive, like education, health care, and public transit.
Unlike people, corporations do not have patriotic pride or feel civic duty. They have one goal – maximizing profits for their owners, even at the expense of the public good through tax avoidance. But states don’t need to let them keep getting away with it. This Tax Day, New Jersey’s legislators need to stand up to Big Business, reinstate the full surtax on profitable mega corporations, and close tax loopholes that let them dodge their responsibilities. It’s time for profitable corporations to pay their fair share in taxes – just like the rest of us.
Peter Chen is a senior policy analyst at New Jersey Policy Perspective, where his work centers on child and family policy issues.