'Flush Tax-Evader Toilet Paper,' Consumer Watchdog Says to California Governor, Mayors

Company Fighting to Keep Tax Loophole Sells Millions in Scott Toilet Paper, Kleenex, Other Products to Government

SACRAMENTO, Calif., June 20, 2012 /PRNewswire-USNewswire/ -- Consumer Watchdog today called on state and local governments to quit spending taxpayer millions on Scott toilet paper, Kleenex tissues and other products from Kimberly-Clark Corporation. The global company is part of a corporate coalition battling to keep a tax loophole that benefits only out-of-state corporations---to the detriment of California schools, local governments and state services.

In letters to Gov. Jerry Brown and the mayors and executives of 21 cities and some large counties, Consumer Watchdog also urged governments to avoid Chrysler and GM auto and truck purchases. The automakers are also in the coalition of out-of-state corporations eager to evade corporate taxes in California.

The letter to Gov. Brown said in part:

"Every dollar of taxes evaded by large corporations is another dollar taken from our schools, fire and police protection and support for the impoverished and disabled. We ask you to set an example by avoiding taxpayer-funded purchases from out-of-state companies lobbying to protect a state loophole that lets them pay less than in-state companies.

"A ripe target is toilet paper and other janitorial products made by Kimberly-Clark, whose brands include Scott paper products and Kleenex. The global company is part of a corporate coalition battling against efforts to use the same corporate tax formula for all companies that sell products in California, as almost all other major states do. California's "take-your-pick" loophole costs the state up to billions of dollars a year. Constituents would both smile and applaud your vow to "Flush Tax-Evader Toilet Paper."

"We also ask you to avoid taxpayer purchases of Chrysler and GM autos and trucks for public safety and other state uses, as well as cardboard products from International Paper Co. They are in the coalition with Kimberly-Clark formed specifically to lobby against a legislative proposal and likely ballot initiative that would close the tax loophole."

(Click here to see the letter to Gov. Brown: http://www.consumerwatchdog.org/resources/ltr-taxevaders_gov.pdf - The letters to localities are similarly phrased.)

A Consumer Watchdog analysis of California purchases through a state purchasing coalition in the current fiscal year shows that Kimberly-Clark products account for 20% to 25% of total "janitorial supply" orders, and over $1.6 million of taxpayer spending in a year. Only some counties, cities and state agencies use the purchasing contract, so the statewide total would be several times larger than $1.6 million. However, the proportion of purchases is likely to be similar statewide, said Consumer Watchdog.

"We want local and state government to flush tax-evader toilet paper," said Judy Dugan, research director for Consumer Watchdog. "State universities, local police departments and other agencies that buy Kimberly-Clark products are also buying themselves deeper cuts in essential services. There are plenty of better choices on the market."

The Consumer Watchdog analysis looked at Department of General Services order lists for janitorial supplies during two quarters of 2011. On an annual basis, orders for Kimberly-Clark products would total more than $1.6 million. (see Excel charts for Q1 and Q3 of the 2011-12 fiscal year linked below.) Independent purchases by many cities and counties would likely at least triple the amount. For instance, Los Angeles, San Diego, San Francisco and Sacramento do not list any purchases through the state contract.

Kimberly-Clark sells 122 products to state and local governments through the janitorial supply company Waxie, which has a multi-state contract for cleaning and janitorial supplies under the Western States Contracting Alliance. Purchases included several counties, small cities, state universities, transit and police agencies.

Kimberly-Clark is one of four global corporations in the deceptively named "California Employers Against Higher Taxes" coalition. The group was formed to fight elimination of an "alternative" corporate tax calculation that benefits out-of-state companies. The loophole costs California up to billions of dollars a year at a time when schools, protective services and aid to the disabled are being slashed.

Two other members of the pro-loophole group, Chrysler and General Motors, recently lost out on a large state contract for nearly 2,000 police cruisers and utility vehicles, for the California Highway Patrol and other agencies. The contract, worth close to $50 million over two years, went to Ford, which is not part of the pro-loophole coalition.

See Consumer Watchdog's news release on the police cruiser contract at http://www.consumerwatchdog.org/newsrelease/consumer-watchdog-cheers-state-contract-award-buy-ford-police-vehicles-shutting-out-tax-

"The state's large contract for Ford vehicles sets a good precedent for putting taxpayer money in the right hands—a major automaker willing to pay its fair share of California taxes," said Dugan.

The fourth member of the coalition is International Paper, which makes cardboard products including the boxes in which California produce is shipped. Its products, usually unbranded and sold through middlemen, are hard to track. A fifth member, Proctor and Gamble, dropped out of the coalition following public protests against its products.

See Consumer Watchdog's analysis of federal tax evasion by members of the pro-loophole coalition at http://www.consumerwatchdog.org/newsrelease/out-state-corporations-fighting-keep-tax-loophole-are-top-us-tax-dodgers-says-consumer-w

The two efforts to close the loophole are legislation by Assembly leader John Perez (AB1500) and a ballot initiative sponsored by tech multimillionaire Thomas Steyer, who fought successfully in 2010 against Proposition 23, which would have benefited oil companies. The proposals would shift California to the corporate tax system used in other major states--a single tax calculation that is primarily dependent on the amount of sales a company made in California.

Consumer Watchdog, a nonprofit, nonpartisan consumer advocacy group, does not support any particular proposal to fix the loophole as long as it stops the gaming of the state tax code.

Here are links to quarterly lists in xlsx format of janitorial purchases through state purchasing contracts.

Q1, 2011-2012: http://www.consumerwatchdog.org/resources/taxevadertoiletpaperq1.xlsx

Q3: http://www.consumerwatchdog.org/resources/taxevadertoiletpaperq3.xlsx

Cities and counties to which letters are being faxed include: Los Angeles, Long Beach, Los Angeles County, San Diego, San Diego County, San Francisco, San Jose, Irvine, Santa Ana, Anaheim, Orange County, Sacramento, Riverside, Fresno, Oakland, Bakersfield, Stockton, Fremont, San Bernardino, Modesto, Oxnard, Fontana, Chula Vista and Santa Monica.

SOURCE Consumer Watchdog