A national study released today by Citizens for Tax Justice makes it clear that many of America's most profitable companies pay little-or no-state income taxes.

The report examined 252 profitable Fortune 500 companies and found that, between 2001 and 2003, 71 completely avoided state income tax. This includes two New Jersey-based firms: Toys R Us and AT&T. The data show total state taxes paid by a company to all the states where it had liability. There is no breakdown to show how much tax a company paid in New Jersey. Companies might have paid tax in some states but gotten tax breaks in other states that gave them a net of no state taxes.

The full report from Citizens for Tax Justice can be found at: http://www.ctj.org/html/corp0205.htm

Other New Jersey-based companies on the list that paid a relatively low rate of state taxes: Becton Dickinson (.6%); American Standard (.7%); Bed, Bath and Beyond (2.1%); Campbell Soup (2.5%); Englehard (2.7%); Public Service Enterprise Group (2.7%); Automatic Data Processing (3.3%); Prudential Financial (3.6%); Quest Diagnostics (4.7%); and Merck (5.7%).

There is reason to believe that during the period covered by the report the situation improved in New Jersey. Reforms of the Corporate Business Tax enacted in 2002 have reduced the ability of companies in the state to avoid taxation. In fact, New Jersey between 1989 and 2003 led the nation in terms of seeing the smallest decline in state corporate income tax paid as a percentage of gross state product.

But, said NJPP President Jon Shure, more reforms are needed. "We still don't know which firms in New Jersey paid only the minimum tax. And we don't know how much the state is giving up in taxes because it gives breaks to companies. There is reason to believe this report is just the tip of a huge financial iceberg-and that working men and women are paying more tax than they should to make up for companies that keep looking for ways to take tax-avoidance to new levels."

In January 2002 New Jersey reformed its corporate business tax to provide for greater equity and fairness, increase the amount of revenue collected from corporations and close tax loopholes. Prior to these reforms, 77 percent of New Jersey's companies paid only the $200 corporate business tax minimum-including 30 of the 50 companies with the largest payrolls in New Jersey.

Although the corporate business tax has long been New Jersey state government's third largest tax revenue source (behind the state income and state sales taxes) and the rate has been 9 percent for more than 20 years, its relative share of total taxes collected declined significantly over time-from nearly 16 percent of the total collected from these three taxes in 1990 to less than 8 percent in 2002.

The reform of 2002 created a new tax, the Alternative Minimum Assessment (AMA), to which many large New Jersey corporations are subjected under certain conditions. Corporations with more than $2 million in gross receipts or $1 million in gross profits are required to calculate their tax liability using the AMA and the current business tax and then pay the greater of the two-but the AMA can't be more than $5 million. The reforms also raised to $500 from $200 the minimum income tax that a business must pay.

The state Division of Taxation 20 years ago used to publish detailed information on the state's corporate tax collections, including the number of returns, the tax liability by range and the total payments in each range. From these data it was possible to find out that 55 percent of corporate tax filers paid less than $100 annually, and fewer than 1 percent paid over $100,000 annually. The lack of such data today is one reason why it is difficult to accurately assess New Jersey's corporate tax system.

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