• Depending on how it is measured, the effective state and local tax rate on corporate profits shrunk by between a third and a half between 1989 and 2017.

• The resulting revenue shortfall is estimated to be at least $43 billion and possibly as high as $57 billion.

• The erosion of state corporate income tax revenue has nothing to do with corporations’ ability to pay.

Indeed, corporate profits have risen even as corporate tax revenues have declined.

• Information obtained from seven states reveals that more than 60% of corporations operating in these states pay no state corporate income tax. And depending on the state, between 11% and 27% of corporations with over $1 billion in federal taxable income pay nothing or next to nothing in state corporate income taxes.

• The decline can be traced to a combination of state corporate income tax cuts, a rise in the share of corporate profits earned by S-corporations, which are exempt from most state corporate income taxes, and the ability of large, profitable corporations to exploit loopholes that allow them to minimize their tax bills.

• This has real consequences for state and local spending—constraining these governments’ ability to provide basic services to their residents.