According to the results of a new national study performed by the Multistate Tax Commission, state revenues from corporate income taxes decreased by more than a third during 2001. The Commission points its finger at corporate tax sheltering as the reason for the states' shortfalls.

Corporate tax sheltering is includes such techniques as reincorporating in off-shore tax havens, holding ownership of intangible assets such as trademarks in separate corporations that siphon profits away from states where corporations actually do business, shifting income to other nations by participating in transactions with jointly-owned foreign corporations, and twisting the tax laws to avoid reporting income in states that have a corporate income tax.

Taxing authorities estimate the total 2001 loss to states through sheltering techniques to be at least $8.3 billion and perhaps as much as $12.4 billion. It is estimated that in the last two decades states have cut the percent of profits they pay in state corporate income taxes by approximately one third.

Of all the states, it appears that West Virginia has been affected by the largest percentage of taxes lost to corporate sheltering. According to the study, West Virginia corporations reduced taxes by as much as 58 percent by sheltering income.

The MTC study concludes that it is only the largest businesses that participate in such heavy duty sheltering. The "vast majority of U.S. businesses are not part of the state corporate income tax sheltering problem," due to the fact that many businesses are too small to participate in or benefit from the sheltering techniques used by the larger companies.

You can read the complete text of the corporate tax sheltering study.