On Jan. 9, 300,000 residents of the Charleston, West Virginia metro area awoke to news that their drinking water had been contaminated when 10,000 gallons of toxic 4-methylcyclohexanemethanol (MCHM) spilled from the storage tanks of Freedom Industries into the Elk River. The toxicity of MCHM, an additive that helps remove impurities from coal, has not been well studied but is known to cause dizziness, vomiting, and rashes, among other things. Charleston’s for-profit water utility, American Water Works, did not continuously test for the presence of MCHM, even though its water intake pipes were located just a mile and a half downstream from the site of the spill. It waited more than five hours after discovering the chemical’s presence in the water lines to notify its customers that their water was unsafe for human use.

Less than a month later and 200 miles away, residents near Eden, North Carolina witnessed the collapse of pipes beneath a giant coal ash storage pond operated by Duke Energy. The coal ash spill, one of the largest in the nation’s history, sent more than 50,000 tons of arsenic-bearing ash and 27 million gallons of contaminated water spewing into the Dan River.

Investigations continue in both cases, with questions being raised about whether federal and state regulation was robust enough.

One common thread between the three corporate actors involved in these accidents, which has not been well explored, is that each firm involved has retreated from their responsibilities to fund public services through the payment of taxes.

Duke Energy reported $ 7.1 billion in profits to its shareholders between 2010 and 2012, and yet paid no federal income taxes during the three-year period. Instead, it claimed $430 million in current tax refunds stemming from various tax subsidies that it received, according to the tax footnote of its Form 10-K, filed with the U.S. Securities and Exchange Commission (SEC). The company’s Duke Energy Carolina subsidiary, which provides electricity to customers in North and South Carolina, paid just $3 million in corporate income tax to those two states over those three years.

American Water Works earned $1.6 billion in profits between 2010 and 2012 and paid $42 million in federal corporate income taxes during those three years. The company’s 2.7 percent effective federal tax rate is a tiny fraction of the posted 35 percent corporate tax rate. American Water Works does not break out its state income taxes by state, but reports it filed with the SEC indicate that the company paid $44 million in state income taxes between 2010 and 2012, an effective tax rate of 2.8 percent.

Freedom Industries is a privately owned company and as such is not required to publicly disclose tax data. But we do know from media sources that Freedom Industries founder Carl Kennedy was sentenced to three years in prison in 2005 after being convicted of tax evasion. (He collected over $1 million of employee withholding taxes between 2000 and 2003 and did not pass those funds on to the government.)

Corporate tax avoidance is not a new story. Corporations have aggressively fought for more loopholes and lower tax rates, both at the federal and state levels. Business leaders argue that low corporate tax rates create jobs. Sadly, the evidence suggests otherwise. Duke Energy is but one example. Despite its less-than-zero tax rate and a major merger with Progress Energy, Duke Energy nonetheless shed 915 jobs between 2008 and 2010, according to the Center for Effective Government's recent study, The Corporate Tax Rate Debate.

When corporations fail to live up to their tax responsibilities, they harm the communities in which they operate in myriad ways: they don’t contribute to the schools that educate their workers, they don’t pay for the upkeep of the roads that deliver their goods, and they don’t pay for the workplace inspectors who ensure that their operations are safe for workers and don’t imperil the safety of neighboring residents.

A brilliant reporter at the Charleston Gazette, David Gutman, made the strong connection between austerity-fueled budget cuts to regulatory agencies and the disaster that continues to affect Charleston:

• The West Virginia Department of Environmental Protection (DEP) had its state funding cut by 7.5 percent in 2013, and an additional 7.5 percent cut is proposed in the budget request submitted by Governor Earl Ray Tomblin days before the spill.
• A larger piece of DEP’s budget comes from federal funding passed to the states. This has also declined sharply as a result of the federal Budget Control Act and the mandatory cuts under the sequester. DEP’s budget for 2014 will be less than any year since 2010. Adjusted for inflation, DEP’s 2014 budget will be $43 million less than it was in 2010.
• During the crisis, state regulators looked to the federal Centers for Disease Control and Prevention’s (CDC) Agency for Toxic Substances and Disease Registry (ATSDR) for guidance on how best to flush MCHM from home plumbing. ATSDR’s budget has declined every year between 2010 and 2013. CDC’s funding of state and local public health offices declined $160 million between 2012 and 2013, according to a CDC fact sheet, obtained by the Gazette. CDC funding to help states respond to natural and manmade disasters was also cut by $33 million in 2013.
• The budget of the federal EPA has also declined each year since 2010, and the agency today has 1,800 fewer employees than it did in 2010. In response to a request for comment from the Gazette, the EPA wrote, “The 2013 sequestration reduced federal support for state water quality programs. These cuts have made it harder for states to maintain their monitoring programs.” A recent blog by my colleague Ronald White provides more details on the impact of EPA cuts on communities.

Allowing our corporate tax code to become a sieve leaking revenues stemming from subsidies, credits, and loopholes has resulted in many of our nation’s most profitable businesses paying little or nothing in taxes. Tax dodging is not a victimless game. It means that when federal and state funds that help protect real families and communities go missing, more incidents like these will occur, and the American people bear the final costs in health problems and loss of life.

West Virginia Rep. Nick Rahall (D) summarized it well in responding to the Gazette, "There’s no doubt that mindless budget cuts in recent years have taken their toll on agencies responsible for emergency preparedness and response. These cuts have had a real impact on our people and have unquestionably hurt our businesses and economy."