If you read Bloomberg Businessweek‘s recent reporting on state efforts to target corporate tax havens, you might want to balance that presentation with some alternative viewpoints … including those of the Cato Institute and the John Locke Foundation’s primary fiscal policy analyst.

Being aware of what other states are doing will help North Carolina be more competitive for business investment. You notice from the above chart that Southeastern states do not require corporations to file a combined report, and are thus unable to tax offshore earnings. Over the last 10 years, we have seen states in the Southeast lowering their corporate income tax rates, and with that, more businesses are moving to these states. The good thing is that, with more and more states in the West and Northeast including these offshore profits in their corporate income tax rates, more businesses will leave those states and come to states like North Carolina.

Corporations want to make money, not face additional taxation. They will relocate to areas that have a less complicated tax code and lower tax rates. According to a John Locke Foundation Spotlight by Dr. Roy Cordato:

The corporate income tax is based on the myth that corporations actually pay taxes. In fact, corporations not only do not pay taxes, they cannot pay taxes. All taxes “paid” by a corporation must come out of real people’s wallets or bank accounts. These real people are shareholders, employees, and customers.

So the answer is NO. States should not collect state corporate income taxes from offshore accounts. But if states do decide to do this, then North Carolina will reap the benefit with a lower tax rate and simpler tax code.