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Corporate Tax Unfair to Regular Taxpayers

Now that we’ve all filed our income taxes for the year, and thereby paid our share of keeping America great ,it seems like as good time as any to reflect on the fairness of the Montana income tax system . I don’t know what you made last year, but if you had to pay any income tax at all I bet you paid more than fifty bucks. For comparison there were 78 out-of-state corporations that paid $50 in 2005 Montana Corporate Income tax. They wouldn’t have had to pay even that much, but $50 is the minimum corporate income tax in Montana.

This and the following tidbits of information are the results of a recent information request I made to the Montana Department of Revenue. It’s based on 2005 figures because that’s the most recent year for which we have complete corporate income tax data.

Those 78 out-of-state corporations had 2005 sales in Montana ranging from $5,000,000 to around $900,000,000. I find it curious that a company with $5 million in sales only has to pay the minimum tax, but it beggars the imagination to understand how a company with almost a billion dollars in Montana sales winds up paying the $50 minimum. It staggers the imagination to find out that it paid that same 50 bucks from 2001 to 2005—five years in a row—as did all the remaining 77 corporations.

That’s right; 78 out-of-state corporations with Montana sales between $5 million and $900 million paid $50 in tax five years in a row. The average tax paid by Montana’s working families is around $500.

Something seems a little off here, and I bet you’d like to know what it is so you can call your state legislators and get them to fix it. But I bet your state legislator doesn’t know what it is either; in fact, I can guarantee it. I have been studying corporate taxes for years, and I don’t know why they pay so little. Come to find out, the Montana Department of Revenue is pretty much in the dark, too; however they have a leg up on us at least, because they know the names of the companies involved. But I don’t know them and you don’t know them, and we’re not allowed to know them because Montana law, like almost every other state, does not allow citizens or legislators to look at corporate income tax information.

You might be wondering how or why we legislators write laws that allow large multi-state corporations to pay so little tax. Well, for the most part we don’t write them because we base our corporate income tax on a percentage of federal corporate tax, so Congress writes the laws that permit corporations to skate on taxes. Actually, I think the mega corporations write the laws and just get Congress to rubber stamp them. However we can write laws that change the way corporate tax is figured in Montana. Some of us have been trying to do that for years, but have had little success getting them through the Legislature

I expect there will be a reaction to this column by the Defenders of the Status Quo, and one of the arguments in that reaction may be that these could all be corporations undergoing unusual financial difficulties, or just using legitimate deductions. They’re guessing, of course, because they have no more ability to know which companies these are than do you or I, but I will grant you that there may be legitimate reasons why companies that large are paying hardly any income tax. And I’d really like to know what they are so I can either put my cynical suspicions to rest or have them confirmed.

Another argument will be that income tax isn’t the only tax corporations pay, they pay property tax too. But so do I, and so do you, and so does every homegrown Montana business—and we still pay our income taxes. The point is not that out-of-state corporations don’t pay taxes to Montana, or that they don’t create jobs, or contribute to the community. The point is that the people of Montana deserve to know what’s going on, and legislators need to know because they are supposed to write laws that protect us "little people".

"Only the little people pay taxes," was the philosophy of a very rich lady named Leona Helmsley. A couple of years after making that statement Leona was carted off to jail for tax evasion. A tax system that gives a tax advantage to the very wealthy and to large corporations at the expense of the "little people" is not fair and should be changed.

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Senator Jim Elliott Senator Jim Elliott is a State Senator from Trout Creek in his 15th year of legislative service, and is chairman of the Senate Taxation Committee.

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