Original Post

McClatchy News Editorial

December 29, 2011

— The Task Force on State Tax Credits and Economic Incentives wants a one-year moratorium on all tax credits in Oklahoma while lawmakers consider the group’s recommendations for greater transparency and stricter oversight.

The hole has given more attention to reports like one released earlier this month by the Institute on Taxation and Economic Policy and Citizens for Tax Justice. That report showed that Oklahoma companies Devon Energy, Williams, ONEOK and Chesapeake Energy paid an effective corporate income tax rate of 0.6 percent, 1.1 percent, 1 percent and -2.1 percent respectively between 2008 and 2010.

“If we have learned one thing during the life of this task force it is that few members of the Legislature had even the dimmest concept of how many tax credits we had on the books, how much they cost or even where they were going,” panel head Rep. David Dank, R-Oklahoma City, said. “The taxpayers certainly didn’t either.”

The dollar amounts are in the hundreds of millions.

It’s certainly not petty cash.

Dank estimated that the one-year moratorium could save the state between $100 million to $150 million annually, although he said it’s difficult to tell because so many of the tax credits are not carefully monitored.

Among the tax credits examined by the panel were those for refurbishing historic buildings, building energy efficient homes, repairing railroad lines, filming Oklahoma-based movies, drilling for oil and natural gas, and producing coal or wind energy.

Let’s be clear: We support tax incentives that lead to job creation or job retention. But if the economic benefit doesn’t outweigh the tax incentive, that defeats the purpose.

The Oklahoma Board of Equalization certified this week that the state would have approximately $6.5 billion available for its 2013 fiscal year budget. That is $120 million more than last year, but it still means lawmakers will have to fill what amounts to roughly a $150 million budget hole.

The moratorium could plug that hole.

As long as the moratorium is done in the correct manner, it is the right decision.

Original Post

December 29, 2011

by Raymond Baker

After the financial deregulation of the 1990s, some US states turned them-selves into tax havens.

My first encounter with the ‘shadow’ financial system was half a century ago in Nigeria. Fresh out of Harvard Business School, I was starry-eyed with hope that the free-market economy would help this newly independent country thrive. Instead, in only a matter of months, I became witness to a system of financial manipulations so incredible that I still have trouble believing it is real.

By ‘shadow financial system’ I am referring to an arrangement as insidious as a pyramid scheme, but much more sophisticated: an unofficial, international financial system functioning in parallel with the honest one I learned about in school. Its purpose is to allow local and foreign ‘elites’ to amass great wealth by tapping into a series of opaque inter-linking deals and system of loopholes, always at the expense of the poor. Today, this system is more abusive than ever and now hurts even the middle-classes of the developed world.

Tax havens are the linchpin of the shadow financial system. When I first came across the phenomena 50 years ago, the term could be applied to a handful of exotic locations like Lichtenstein and Curacao. Since then the demand for the services they provide -essentially different variations on how to hide a person’s identity and source of wealth- has grown to such an extent that at last count there were over 60 tax havens around the globe. Today Americans are no longer obliged to go offshore to have their money be ‘offshore.’ After the great wave of financial deregulation of the 1990s, several US states turned themselves into tax havens.

Trade mispricing

Another pillar of the shadow financial system is trade mispricing. Arriving in Nigeria, I expected import-export prices to be set by supply and demand, instead they are often determined by how little customs duty or tax a buyer or seller wants to pay. Fifty years later, trade mispricing is more prevalent than ever, aided by the fact that approximately 60 per cent of global trade is conducted by multinational corporations and half that amount is between subsidiaries of a parent company.

Corporations are not alone in stealing from the developing world. The Arab Spring shed light on the wealth Ben Ali, Mubarak and Gaddafi managed to syphon out of the countries they ruled. Although it’s easy to pin the blame for capital flight on local corruption, the reality is that without the shadow financial system (created and sheltered by international corporations and governments), none of these kleptocrats would have been able to stash their country’s wealth in private Swiss, UK, Austrian and U.S. bank accounts.

In the developed world theft and death are not normally inter-related, in the developing world they often are. Economists Leonce Ndikumana and James Boyce calculate that the effect on public health of capital flight out of Africa is so great that it is responsible for an additional 75,000 infant deaths annually. They present the example of the main hospital in Congo-Brazzaville, which is so poor that patients have to pay bystanders to carry them up and down stairs.

Despite the suffering it causes in the developing world, the United States and Europe have long paid little attention to this system and its consequences, likely because it did not appear to cause them any harm and might even have appeared to be good business. Starting sometime in the 1990s this changed.

Enhanced with elaborate new devices such as “derivatives”, “collateralised debt obligations”, and “interest rate swaps” the shadow financial system took off in the West. Although it is not directly responsible for the current financial crisis, the system exacerbates it by providing the means for businesses and individuals to avoid paying tax and hide ill-gotten gains, thus bleeding desperate governments of much needed revenue. This has led to the groundswell of anger we are seeing with the ‘Occupy’ movements across the developed world.

A report published in early November by Citizens for Tax Justice found that among America’s 280 largest corporations 78 of them paid no federal corporate taxes or even negative tax rates for at least one year since 2008. The situation might be even more dire in parts of Europe. As the Euro struggles to survive, recent calculations by a European Union task force suggest that as much as 60 billion Euros have escaped to Swiss banks this year –much of it in unpaid taxes.

One lesson I learned in business school remains as true today as ever and that is that capitalism and a free-market depend on justice to flourish. For this reason we must rid ourselves of the injustice of the shadow financial system, which grossly favours the rich at the expense of the poor. The mechanisms it runs on may appear rather complex (which is natural as they were built with opacity in mind) yet the solution is rather simple: transparency.

Transparency in all financial transactions both local and international; transparency in public records; transparency and multiple oversight mechanisms to review financial structures; transparency to ensure that trade is conducted without disadvantaging weaker nations. A system that counts on shadows to survive will not survive once there is light.

(The writer is director of the task force on Financial Integrity and Economic Development)

Original Post

BY ADELE SAMMARCO

December 27, 2011

It’s no secret residents from surrounding states drive to New Jersey to fill-up their gas tanks for less than what they would ordinarily pay in their own state.

But according to a new report, the Garden State is losing money each year for not increasing its gas tax rates to keep pace with rising transportation and construction costs.

New Jersey hasn’t increased its gas tax rate in 23 years and because of that, the Institute on Taxation and Economic Policy says the state leaves behind more than $500 million on the table every year.

According to the Institute’s report, “Building a Better Gas Tax,” New Jersey’s gas tax rate has fallen by 40 percent over the last two decades.

And New Jersey is not alone. The report shows the average state has not increased its gas tax rate in over a decade, where 14 states have gone 20 years or longer without an increase.

But while New Jersey’s gas taxes remain the same, the cost of repairing roads and building bridges has risen significantly nearly every year, often, most economists say, at a rate higher than general inflation.

In a press release issued by ITEP, the author of the study calls the findings, “basic math”.

Senior ITEP Analyst Carl Davis said in a statement, “The road repairs you could buy in 1990 with 20 cents, for example, are going to cost 34 cents today. But we still see some states collecting the same flat 20 cent tax that they did back in 1990. That’s the definition of unsustainable.”

NJToday reports New Jersey charges 10.5 cents per gallon of gasoline, and 13.5 cents per gallon of diesel fuel. Including the federal gas taxes, New Jersey’s 32.9 cents per gallon rate is the third lowest overall gas tax in the country. The diesel rate, at 41.9 cents per gallon, is the sixth lowest overall rate.

In his report, Davis offers specific policy recommendations for modernizing the state’s gas taxes:

• Increase gas tax rates to (at least) reverse their long term declines. The appropriate contemporary rate for each state will depend on transportation funding needs as determined by lawmakers and the public.

• Restructure state gas taxes so that their rates rise automatically alongside the inevitable growth in the cost of transportation construction projects. If every state had restructured the last time it raised its gas tax, total state gas tax revenues would be over $10 billion higher per year.

• Create or enhance targeted tax credits for low income families to offset the impact of gas tax reform.

Analysts believe the state gas tax has eroded over the years, causing disastrous effects on the nation’s transportation and infrastructure. They say $10 billion in gas tax revenue is lost each year, which plays a large role in the U.S. economy.

The American Society of Civil Engineers (ASCE) estimates a $10 billion drain on the economy in the form of higher vehicle repair costs and travel time delays. And according to the findings, believe these costs can greatly be reduced if lawmakers raise sufficient revenues for state roadways and transit systems.

Original Post

December 27, 2011

by PAUL BUCHHEIT

Recent reports suggest that almost 50% of Americans are in poverty or at a “low income” level. The claim is based on a new supplemental measure by the Census Bureau that includes health care, transportation, and other essential living expenses in the poverty calculation.

The concept of “low income” is controversial. It has been defined as earnings between 100 and 199 percent of the poverty level, a claim which, if true, would place every American family making $50,000 or less at a near-poverty level.

Conservative organizations believe the whole ‘poverty’ issue is overblown. The Cato Institute blames LBJ and Obama for reversing a declining poverty rate. Forbes blames the calculations. The Heritage Foundation argues, “The average poor person, as defined by the government, has a living standard far higher than the public imagines…In the kitchen, the household had a refrigerator, an oven and stove, and a microwave.” The case for a growing “consumption equality” is alternately defended and denied.

With emotions running high on both sides, we need to take a balanced look at the available data to determine how well the highest-earning family of the poorest 50% — a family with a $50,000 income — can survive. (The maximum individual income for the poorest 50% is about $30,000.)

Start with taxes. It is frequently noted by conservatives that the richest 1% pay most of the federal income taxes, and indeed they paid about 37 percent in 2009, more than the poorest 90% of Americans. But only the richest 5% of Americans have experienced income growth since 1980. And during that time, their tax rate has dropped from 34% to 23%. As for the 3 percent rate paid by the poorest 50%, the Tax Policy Center sums it up nicely: “The basic structure of the income tax simply exempts subsistence levels of income from tax.”

More relevant to the poverty issue is that federal income tax is only a small part of the tax expense for lower-income families. According to a study by The Institute on Taxation and Economic Policy, the poorest 50% paid about 10 percent of their incomes in state and local taxes (the richest 1% paid 5 percent). Congressional Budget Office (CBO) figures reveal that the bottom 50% pays about 9 percent of their incomes toward social security (the top 1% pays just under 2 percent). CBO also shows that the bottom 50% is paying about 2 percent of their incomes on excise taxes, a negligible expense for the people at the top. Another year of Bush tax cuts will chop another 1-2 percent off the taxes of the very rich.

So total taxes for the poorest 50% are 24 percent of their incomes (3% + 10% + 9% + 2%), as compared to 29 percent for the richest 1% (23% + 5% + 2% – 1%).

Other significant expenses for low-income people, based on the most conservative estimates from the Bureau of Labor Statistics, the Census Bureau, the National Center for Children in Poverty, the Carsey Institute, and the Economic Policy Institute, include food (10%), housing (27%), transportation (6%), health care (5%), child care (8%), and household expenditures (5%). Expenses for insurance and savings and entertainment, although important to most households, are not being included here.

Energy costs hit low-income families especially hard, taking about 20% of their incomes. At the $50,000 income level the burden is closer to 12%, as generally agreed upon by the Bureau of Labor Statistics, the Coalition for Clean Coal Electricity, the Department of Housing and Urban Development, and the American Gas Association.

Total expenses for the richest family in the bottom half of America? – 24% taxes – 27% housing – 34% food, health care, child care, transportation, household needs – 12% energy.

That’s 97% of their income. The richest family among 70,000,000 households is left with just $1,500 for a car, appliances, a TV, a cell phone, a loan repayment, an occasional night out. It comes to $30 a week, barely enough to take the family out for a pizza.

Critics bemoan the amounts of aid being lavished on lower-income Americans, making dubious claims about $16,800 in government funds going to every poor family and families with $90,000 incomes being classified as “near poor.”

The fact is that only 4,375,000 families (out of 70,000,000 in the bottom half) received Temporary Assistance for Needy Families (TANF) in 2010, for a total expense of about $36 billion. Current federal budgets include about $350 billion for food, housing, and traditional ‘welfare’ programs for needy children, elderly care, and energy assistance. This averages out to about $400 per month per family.

PAUL BUCHHEIT is a part-time faculty member in the School for New Learning at DePaul University, author of UsAgainstGreed.org and RappingHistory.org, and the editor of “American Wars: Illusions and Realities” (Clarity Press). He can be reached at paul@UsAgainstGreed.org.

Original Post

December 27, 2011

STATE – According to a report released earlier this month, New Jersey is leaving more than $500 million on the table each year by not increasing its gas tax rates to keep pace with increases in transportation construction costs.

The report, “Building a Better Gas Tax” from the Institute on Taxation and Economic Policy, says that the effective gas tax rate has fallen by 40 percent over the last 20 years, since New Jersey hasn’t increased the gas tax since 1988.

New Jersey charges 10.5 cents per gallon of gasoline, and 13.5 cents per gallon of diesel fuel. Including the federal gas taxes, New Jersey’s 32.9 cents per gallon rate is the third lowest overall gas tax in the country. The diesel rate, at 41.9 cents per gallon, is the sixth lowest overall rate.

“Building a Better Gas Tax” shows that the average state has not increased its gas tax rate in over a decade, and 14 states have gone 20 years or longer without an increase. But while state gas taxes remain flat, the cost of paving roads and building bridges inevitably rises almost every year, often at a rate higher than general inflation. “It’s basic math,” said Carl Davis, senior analyst at ITEP and author of the study. “The road repairs you could buy in 1990 with 20 cents, for example, are going to cost 34 cents today. But we still see some states collecting the same flat 20 cent tax that they did back in 1990. That’s the definition of unsustainable.”

“Unfortunately, many politicians won’t consider touching the gas tax,” said Davis. “They are raising sales taxes, fees on vehicles, tolls on roads, even looting education funds, all to make up for the stagnant gas tax. But they can’t bring themselves to modernize the biggest source of transportation revenue that’s actually under their control. It makes no sense.”

“Building a Better Gas Tax” offers three specific policy recommendations for modernizing state gas taxes:

1. Increase gas tax rates to (at least) reverse their long term declines. The appropriate contemporary rate for each state will depend on transportation funding needs as determined by lawmakers and the public.

2. Restructure state gas taxes so that their rates rise automatically alongside the inevitable growth in the cost of transportation construction projects. If every state had restructured the last time it raised its gas tax, total state gas tax revenues would be over $10 billion higher per year.

3. Create or enhance targeted tax credits for low income families to offset the impact of gas tax reform

The full study is available at http://www.itepnet.org/bettergastax/

(Original Post)



Mitt Romney: The Wealth Factor

Can voters relate to a candidate with a quarter-billion-dollar fortune?

04:01 | 12/19/2011

(Original Post)

December 21, 2011, 5:13 PM ET

By Christopher Matthews

New plans by the Financial Action Task Force to add tax evasion to the list of crimes covered by money laundering laws are likely to be accepted at the influential group’s plenary sessions early next year, a move that could have large consequences.

The Paris-based anti-money laundering group has been pushing to add tax evasion as a predicate crime for money laundering for more than two years, and appears to be nearing the finishing line, according to two people familiar with the process.

Earlier this month, the FATF completed a consultation with the private sector about changes to its global anti-money laundering and counter-terrorism financing standards, and is in the process of finalizing the text that will be submitted to the group’s formal plenary meetings in January and February. The tax offense predicate will be in the text and is likely to be accepted at next years’ meetings, the people said.

“The writing is on the wall for tax havens,” one person said.

Momentum for adding a tax evasion predicate has picked up over the past two years, as developed nations have found themselves cash-starved in the wake of the financial crisis. Large economies, including the U.S., are eyeing tax havens for additional revenue and have exerted greater pressure on tax shelters to open their books to regulators.

Adding tax evasion as a predicate crime could have wide-ranging effects. FATF’s standards carry a lot of weight in the international community. More than 180 countries — including China and Russia — have committed to meet the group’s standards and subject themselves to evaluations by their peers. Being placed on the FATF’s blacklist of non-cooperative countries can have profound economic consequences.

If countries create a tax crime predicate, financial institutions and multinational corporations will be affected, said Thomas Bogle, a partner at Dechert LLP.

“Banks and companies would have to take a hard look at what is actually legitimate tax planning and what is tax evasion for reporting purposes,” Bogle said.

So far, financial institutions have expressed concerns about the addition. In letters sent to the FATF earlier this year, a number of banking associations warned that if the tax evasion predicate were defined too broadly, it could be onerous.

“The inclusion of tax crimes as a predicate offence for money laundering should be designed with care,” the Association of Foreign Banks in Germany wrote in January. “While it seems appropriate to include heavy tax crimes – in particular tax offences conducted in a commercial manner or by a criminal organisation, ‘ordinary’ tax evasion should not become a predicate offence since, especially in smaller institutions, AML departments usually do not have the capacity to monitor such such offences.”

Good governance groups, which have long advocated for a tax offense predicate, have pushed for a more open-ended definition of tax evasion. Rebecca Wilkins, senior counsel at Citizens for Tax Justice, said tax evasion is often facilitated by funneling money through secrecy jurisdictions.

“Tax evasion  — whether committed by individuals or corporations — is a crime and its victims are honest taxpaying citizens all over the world,” Wilkins said in an email. “The proceeds of those crimes are the funds that should have been paid to the government and are badly needed to fund critical services, especially in these difficult times.”

One person familiar with the negotiations said the predicate is not likely to encompass low-level or misdemeanor tax crimes, but would be focused on larger-scale tax evasion. Striking a balance will be paramount, according to Bogle.

“The devil is in the details,” Bogle said.

(Original Post)

Wednesday, December 21, 2011Last Update: 10:24 AM PT

By MARIA DINZEO

SAN FRANCISCO (CN) - Pharmaceutical mogul Patrick Soon-Shiong registered a for-profit California corporation for the purpose of "data mining" during the same period that he was offering through a charity to host data for a court IT project that has already cost California a half-billion dollars.

Earlier this fall, leaders of California courts, who are often criticized over their stewardship of public monies, characterized the mogul's offer in effusive terms as a "game changer." Soon-Shiong was variously described as "a strategic partner," an "angel in the wings" and a "white knight."
    
But those views are not universally shared.
    
"Those in control are casting about in a frantic attempt to save this failed project, rather than simply cutting the taxpayer's losses," said Chuck Horan, a retired Los Angeles judge and member of a group of judges critical of the current leadership of California's courts.
    
An appellate justice who lauded the deal, Terence Bruiniers, said that while the offer was made through one of Soon-Shiong's charities, the multi-billionaire was also ready to help the courts through his business entities.
    
Bruiniers conceded through his comments that secret negotiations had been under way with Soon-Shiong for at least a year, a period that encompasses the February 10th date when the billionaire set up Nantworks, LLC.
    
The category for the company, listed with California's Department of Corporations, is "data mining technology." Soon-Shiong said at the time that he was starting a "digital revolution," and the company would focus "on areas where advances in technology are most severely needed, such as healthcare and scientific research, education and even within our justice system."

Man of Fortune
    
Patrick Soon-Shiong is a South African of Chinese descent. He made enormous amounts of money through the sale of a drug for women with breast cancer, called Abraxane, which was criticized for its high cost and described in a cancer research journal as "old wine in a new bottle."
    
He is also one of the first Americans to sign the Giving Pledge, along with Warren Buffet and Bill Gates, promising to give away half of his estimated $7 billion fortune. While press articles call attention to his philanthropic pursuits, the bio-tech billionaire is generally described as an "investor" or "entrepreneur."
    
The ownership of his Nantworks company is a convoluted affair. An earlier company called Nantworks LLC was formed in 2007 and then abandoned. The very similar Nantworks, LLC, with the comma added, was then formed in February.
    
That company is in turn tied to a Delaware-registered company, Nant Holdings IP, LLC., according to the website corporationwiki.com. Those two entities are then connected to a spider's web of related companies.
    
A day after Nantworks was formed, Soon-Shiong set up on Feb. 11 another charity, in addition to his family foundation, called the Chan Soon-Shiong Institute for Advanced Health.
The institute then began setting up data centers and a supercomputer in Phoenix.
    
By July, the charity had made a big technology acquisition.
    
It bought National Lambda Rail, consisting of 12,000 miles of fiber optic cable used by NASA, government laboratories and research institutions to send scientific data across the country at speeds of up to 100 giga-bytes per second.
    
"NLR was running out of money, and Soon-Shiong offered to write a $100 million check in July to upgrade the entire network," said a Forbes article on the leveraged buy-out.
    
The rail also seems to run at the center of a tech empire.
    
Soon-Shiong has bought LookTel, a company that has developed technology allowing smart phones to scan and recognize objects, and Ziosoft, a company specializing in supercomputing software and providing 3D medical imaging.
    
He also sits on the board of directors of Dossia, described by Forbes as a "maker of personal health records." Some of his other deals are with Vodafone, Toumaz and Vitality, all involving wireless technology.
    
Nantworks, LLC together with the advanced health charity have invested a total of $400 million in the Lamda rail and other tech companies, according to Forbes.
    
The rail links major medical research institutions around the U.S., a system that bears some similarity to the Internet itself, which started as a network of educational and military institutions linked through high speed cables. The key difference is that the Internet is not controlled by any one individual or entity.

Tidings of Joy
    
Soon-Shiong's idea of using that rail and its servers to host the extensive data in California court records, including debtor judgments and convictions of individuals, was trumpeted by Judicial Council members at their October meeting.
    
In expressing great joy at the offer, they said the hosting would take financial pressure off an IT system called the Court Case Management System on which the council has already spent a half-billion in public funds and on which it is projected to spend about $1.5 billion more.
   
Justice Bruiniers, who consistently defends the big IT project, called the Soon-Shiong deal "literally a game-changer." Referring to Soon-Shiong, he added, "What he has expressed is his interest in ensuring public safety and public welfare."
    
Marin County's head clerk Kim Turner gushed, "I am so excited about the opportunity that this presents for -- I'm on the CCMS internal committee. And also a member of one of the committees that reports to the executive committee. I think it's just so intriguing and exciting to have a partner, a potential strategic partner."
    
Santa Barbara Judge James Herman said, "He's interested philanthropically in improving the lives of the citizens of California." Plumas County Judge Ira Kaufman called him "an angel in the wings."
    
Not so Horan, who is a member of the Alliance of California Judges.
    
"We know that the same group vetting this 'offer' is the group that promised that CCMS would cost $250 million," said Horan. "They were off by a factor of 8, as the total pricetag will approach 1.9 billion."
    
"CCMS is operational in a small fraction of courts," he continued. "The project seems to be imploding. Nonetheless, the Chief Justice insists that CCMS is the judiciary's way out of poverty."
    
Some of California's courts have gone into the publishing business, selling records online while delaying access to the press and public until the documents are up for sale. The Administrative Office of the Courts, which operates under the chief justice, has justified the huge expense of the IT system in part by talking about the millions that could be made through those sales.

The Ego Thing

     One of the noteworthy points about Soon-Shiong's offer to host those records on his servers, super-computers and Lamda rail is that, in addition to gaining a measure of control over data generated at enormous public expense, the offer itself would in effect be subsidized by the public because it is coming through a charitable foundation.

     "While he may have altruistic motives, doing it through the foundation gives him an immediate tax deduction," said Rebecca Wilkins, Senior Counsel for Citizens for Tax Justice.

     As a former tax lawyer, she added, "I had quite a few wealthy clients that set up private foundations. One of the things that drives them is the tax deduction and the other thing is the ego thing."

     Wilkins was struck by Soon-Shiong's purchase of companies with goals related to the charitable foundation's offer to host California's court data. "I suspect what happened was he decided that if he wanted to invest in these companies he didn't want the profits to remain trapped inside the charity," she said.

     A similar hosting deal in the much smaller state of Colorado allowed a private publisher to make millions in profit by hosting the court's case management data. The administrative office for the Colorado courts has fought a three-year battle to regain control of the records, which the publisher, Reed Elsevier, has resisted through the Legislature with a high-power corps of lobbyists.

     Perhaps aware of that fight, California's Legislature has provided a cold shower to the Judicial Council's enthusiastic embrace of Soon-Shiong. State Senator Noreen Evans announced last month that she is skeptical of the deal.

     As chair of the Senate Judiciary Committee, Evans is a crucial ally of the council in a Legislature where a bill is pending that would direct a much higher percentage of the overall court budget to the local trial courts -- a measure that is deeply opposed by the council and the bureaucrats who currently control that $2 billion purse.

Secret Meeting

     After Evans expressed her negative opinion of the deal, the council again considered the hosting offer at their meeting last week. Administrator Christine Patton said in public session that negotiations with Soon-Shiong are moving slowly, and the legal issues "really need to be dealt with first."

     Her statement was echoed by the council's legal counsel. And silence followed. Not one member of the council raised a hand to speak.

     The quiet moved Chief Justice Tani Cantil-Sakauye to comment that nothing should be interpreted from the "otherwise silent record." "I don't want you to take the dearth of questions so far to be a sign of anything but that we've discussed this," she said.

     Apparently, the deal had been extensively discussed in an earlier, closed meeting, so much so that it delayed the start of the open, public meeting.

     Seeking to penetrate the secrecy surrounding the deal, Courthouse News made a public records request two weeks ago for any correspondence between Soon-Shiong and the AOC regarding his offer.

     In an answer delivered Tuesday, the AOC directed Courthouse News to the agency's public website and provided a copy of an official letter of intent already widely distributed to the media. The bureaucracy refused to disclose the rest of the records regarding a year's-worth of negotiations.

     "The AOC cannot be trusted to make honest, competent determinations as to the advisability of taking funds from this person," said Horan. "The state auditor, or some other independent and competent entity needs to be brought in at this point, in my opinion, to insure that a thorough investigation of this proposal takes place and is in the best interest of the public."

     "Given the secrecy surrounding the offer of the 'benefactor,' I am very concerned that more bad decisions likely will be made," he concluded. "This time, the integrity of the system may be at stake."

(Original Post)

By Kevin Osborne · December 21st, 2011 · Porkopolis

Since this column will be published four days before Christmas and many readers will be overdosing on holiday cheer and goodwill, here are some items that should really help counteract those warm, fuzzy feelings for a bit.

A new report released this month found that 30 large U.S. corporations paid more to lobby Congress than they paid in federal income taxes for the three years between 2008 and 2010, despite all of them being profitable.

Just as disturbing, despite making combined profits totaling $164 billion in that three-year period, the 30 companies combined received tax rebates totaling almost $11 billion. Only one of the 30 companies paid any federal income tax during that time.

Corporations that received tax rebates included such well-known firms as Duke Energy, General Electric, Boeing, Honeywell International, Wells Fargo and Verizon Communications.

If your blood isn’t boiling yet, just wait. Here are a couple of facts that might help explain why these lucrative firms got such a cozy deal from Uncle Sam.

The 30 corporations spent $476 million during the three-year period to lobby Congress. That equates to spending about $400,000 each day, including weekends. And during the three-year period of 2009-11, the firms donated more than $22 million to various federal political campaigns.

Let’s see: Getting $11 billion in return on a $498 million “investment” probably does seem like a worthwhile transaction to the executives sitting in those corporate offices.

The disturbing facts were included in a report compiled by Public Campaign, a nonprofit, nonpartisan organization dedicated to making major campaign reforms to reduce the role of special interest money in American politics. The Washington, D.C.-based group used data from a recent report on corporate tax-dodging by Citizens for Tax Justice, along with examining lobbying expenditure data provided by the Center for Responsive Politics.

Additionally, the report uses publicly available data on job creation, federal campaign contributions and executive compensation to analyze how the corporations spend their money.

“Big corporations and their CEOs get special deals in Washington at the expense of poor and middle class Americans,” the report concludes.
    
“Congress continually votes to give tax breaks to oil companies and hedge fund managers, while continually debating ways to cut important programs that benefit the ‘99 Percent.’ ”

Most of the companies cited in the report use various tax-dodging techniques and loopholes to avoid paying their fair share. The most common tactic, the report states, is stashing profits in overseas tax havens.

As a result, 29 of the companies received tax rebates during those three years, ranging from a $4 million rebate for Corning to a nearly $5 billion (with a “b”) rebate for GE. During the same period, Corning reported $1.97 billion in U.S. profits, while GE reported $10.46 billion in profits.

The only corporation among those analyzed that paid taxes in the three-year period, FedEx, paid a three-year tax rate of 1 percent, much less than the statutory corporate tax rate of 35 percent. (FedEx had $4.2 billion in U.S. profits, but paid just $37 million in taxes.)

In other words, most people reading this column paid at a higher income tax rate than these corporations, which raked in billions of dollars in profits.

Here’s how a General Electric spokeswoman tried to explain away the situation in April 2010, when I blogged about how Forbes magazine reported the firm hadn’t paid any federal income tax for 2009.

“Our industrial business had a 21 percent tax rate in 2009, down slightly from 2008. But when combined with the losses and tax benefits associated with GE Capital’s global operations, we end up with the negative rate,” the GE spokeswoman said. “Like many other financial institutions, GE Capital incurred a pre-tax loss in 2009 during the worst economic crisis since the Great Depression. In contrast to the 2009 results, GE’s cumulative U.S. current tax provision from 2000-2009 totaled almost $7.4 billion. GE paid almost $23 billion of taxes to governments around the world from 2000-2009, making it one of the highest payers of corporate income taxes.”

For those paying attention at home, the 21 percent rate she cited is still considerably less than the 35 percent rate corporations are supposed to be paying.

By the way, during the 2008-10 period, GE spent $84.3 million on lobbying. And since 2008, the company has shed 4,168 workers in the United States.

Unfortunately, this is nothing new.

In 2008, the Government Accountability Office found that “two out of every three United States corporations paid no federal income taxes from 1998 through 2005.”

Americans are finally starting to comprehend this startling economic inequality.

A poll released Dec. 15 by the Pew Research Center found that 77 percent of respondents believe large corporations and the ultra-wealthy have too much power. Also, it found 61 percent said the U.S. economic system unfairly favors the rich; and 51 percent said Wall Street hurts the economy more than it helps.

Will the Democratic or Republican politicians in Washington listen to the will of the American people, or will they continue to curry favor with the super-rich? We shall see.

Economist Robert Reich, who was labor secretary under President Clinton, hopes this inequality becomes the defining issue of the 2012 presidential campaign.

“Americans have never much liked government. After all, the nation was conceived in a revolution against government,” Reich wrote on his blog. “But the surge of cynicism now engulfing America isn’t about government’s size. The cynicism comes from a growing perception that government isn’t working for average people. It’s for big business, Wall Street and the very rich instead.”

Happy holidays. Now, let’s all resolve to get busy and begin changing this sorry state of affairs in the New Year.

(Original Post)

Dec 20, 2011 10:09 EST

By David Cay Johnston

The views expressed are his own.

David Cay Johnston
» See all analysis and opinion
The corporations that occupy Congress
Dec 20, 2011 10:09 EST

    inShare

congress | corporate influence | lobbying | unions

By David Cay Johnston

The views expressed are his own.

Some of the biggest companies in the United States have been firing workers and in some cases lobbying for rules that depress wages at the very time that jobs are needed, pay is low, and the federal budget suffers from a lack of revenue.

Last month Citizens for Tax Justice and an affiliate issued “Corporate Taxpayers and Corporate Tax Dodgers 2008-10?. It showed that 30 brand-name companies paid a federal income tax rate of minus 6.7 percent on $160 billion of profit from 2008 through 2010 compared to a going corporate tax rate of 35 percent. All but one of those 30 companies reported lobbying expenses in Washington.

Another report, by Public Campaign, shows that 29 of those companies spent nearly half a billion dollars over those three years lobbying in Washington for laws and rules that favor their interests. Only Atmos Energy, the 30th company, reported no lobbying.

Public Campaign replaced Atmos with Federal Express, the package delivery company that paid a smidgen of tax — $37 million, or less than one percent of the $4.2 billion in profit it reported in 2008 through 2010.

For the amount spent lobbying, the companies could have hired 3,100 people at $50,000 for wages and benefits to do productive work.

The report – “For Hire: Lobbyists or the 99 percent” – says that while shedding jobs, the 30 companies are “spending millions of dollars on Washington lobbyists to stave off higher taxes or regulations.”

These and other companies have access to lawmakers and regulators that are unavailable to ordinary Americans.

CALL CONGRESS

Doubt that? Dial the Capitol switchboard at 1 (202) 224-3121, ask for your representative’s office and request a five-minute audience, in person, at the lawmaker’s convenience back in the home district.

In more than a decade of lectures recommending this, I have yet to have a single person email me (see address to the right) about having scored a private meeting with the representative called.

Corporations have vast resources to pour into ensuring access — resources that expand when little or no taxes are paid on profits thanks to rules they previously lobbied into law.

Companies form nonprofit trade associations, hire former lawmakers and agency staffers, and have jobs to dole out to lawmakers after they leave office and to friends and family while they’re in office. Thanks to the Supreme Court’s Citizens United decision, corporations can now pour unlimited sums into influencing elections. So can unions, but they are financial pipsqueaks compared to companies.

Then there are political action committees, or PACs, to finance campaigns as well as donations by executives and major shareholders.

Combine all this and you have a powerful formula for making rules that favor corporate interests over human interests, something that the framers of the U.S. Constitution understood more than two centuries ago.

James Madison wrote disapprovingly in 1792 of “a government operating by corrupt influence, substituting the motive of private interest in place of public duty” where eventually “the terror of the sword, may support a real domination of the few, under an apparent liberty of the many.”

FEARS COME TRUE

The late U.S. president’s fears have come to life. For swords, just substitute police with rubber bullets, batons and pepper spray at Occupy demonstrations, including perfectly peaceful ones.

Company reports to shareholders show that among the 30 companies in the Public Campaign report, the 10 firms that spent the most on lobbying during the same three-year period fired more than 93,000 American workers.

Those firings took place in an economy that had five million fewer people with any work in 2010 than in 2008.

All those firings mean higher costs to taxpayers to support those unable to find work, including the more than 4.2 million Americans who are now persevering by applying for jobs after more than a year. Millions more have given up and are no longer counted among the unemployed.

Federal Express spent $25 million lobbying to protect a rule that makes it virtually impossible for its express delivery workers to unionize. That’s 67 percent of what it paid in taxes.

FedEx says it was “educating lawmakers” about a proposal “that would cripple competition in the express delivery industry and hinder our nation’s future economic success.”

The Teamsters, who represent drivers at United Parcel Service, say FedEx was protecting a special interest rule that shorts workers. UPS pays its unionized drivers 53 percent to 104 percent more per hour than FedEx does.

The United States already ranks second among modern nations, just behind South Korea, in the share of its workers in low-wage jobs while too many companies lobby for ever lower taxes, ever smaller wages and ever fewer worker rights to protect the mighty torrents of greenbacks flowing into their coffers. A better balance would make America better off.

(Original Post)

By Pat Garofalo on Dec 19, 2011 at 9:35 am

2012 GOP presidential hopeful Mitt Romney has been banking on his time running the private equity firm Bain Capital to be a major selling point for his campaign. “I spent my career in the private sector. I think that’s what the country needs right now,” Romney says.

Romney has had to contend with the fact that Bain made a lot of its money buying up companies, then laying off workers and reneging on benefits to gut those companies, burying them with debt as Bain walked away with millions. In fact, one of his former business partners has explicitly said, “I never thought of what I did for a living as job creation.” And as it turns out, even after Romney left the firm, he was profiting from Bain’s activities due to a lucrative retirement deal:

    In what would be the final deal of his private equity career, he negotiated a retirement agreement with his former partners that has paid him a share of Bain’s profits ever since, bringing the Romney family millions of dollars in income each year and bolstering the fortune that has helped finance Mr. Romney’s political aspirations.

    The arrangement allowed Mr. Romney to pursue his career in public life while enjoying much of the financial upside of being a Bain partner as the company grew into a global investing behemoth.

Since Romney left, Bain has made its money gutting companies like KB Toys and Clearchannel, laying off thousands of workers and leaving the companies under heavy debt loads, while Romney has reaped the benefit. Adding insult to injury, the money Romney has been collecting from Bain is likely not taxed as normal income but as “carried interest,” meaning it is subject to the capital gains tax rate of 15 percent rather than the top income tax rate of 35 percent:

    [S]ince Mr. Romney’s payouts from Bain have come partly from the firm’s share of profits on its customers’ investments, that income probably qualifies for the 15 percent tax rate reserved for capital gains, rather than the 35 percent that wealthy taxpayers pay on ordinary income. The Internal Revenue Service allows investment managers to pay the lower rate on the share of profits, known in the industry as “carried interest,” that they receive for running funds for investors.

Because Romney’s income is almost exclusively derived from what are qualified as investments (he recently said he has no income that qualifies for the personal income tax), he is able to drive his tax rate to absurdly low levels for someone making as much as he does. Citizens for Tax Justice estimated that Romney pays about a 14 percent tax rate, below the level at which many middle-class families are paying. And he’s paying that low rate on money made via dismantling companies and eliminating jobs.

(Original Post)


December 19, 2011 | 10:25 AM | By Colby Hamilton

Today on “The Capitol Pressroom”:

The North Country was a big winner in the economic development grant competition. While the 16 projects that won the $103.2 million dollars are posted on-line, we wanted to know how these projects will leverage growth throughout the region, and help to create the 1000 promised new jobs? Where will be they?

Susan speaks with two long-time proponents of development in the North Country to hear what they are hoping for: Bill Farber, Chairman of the Board of the Hamilton County Board of Supervisors as well as the county Republican Chairman and the Supervisor of the Town of Morehouse; as well as Jim McKenna of the Regional Office of Sustainable Tourism.

Unemployment among war veterans of Iraq and Afghanistan is higher than for other vets, as well as higher than for their peers without college degrees. Over the next five, years with overseas conflicts coming to an end, an estimated one million more veterans will be entering the job market — a concern in upstate New York considering the lackluster economy and the numbers of veterans upstate counties have sent to fight overseas.

Is there help? We speak with Sgt. Maj. John Willsey of the 42nd Special Troops Battalion who has suggestions for returning veterans looking for work, as well as advice to prospective employers hesitant to hire veterans with any history of PTSD.

The Institute on Taxation and Economic Policy and Citizens for Tax Justice have partnered on a newly released report on corporate tax dodgers. Co-author and ITEP Executive Director Matthew Gardner will share details. (See Above link for Audio)

(Original Post)

Saturday Dec 17, 201103:06 PM GMT

Paul Bachheit, CommonDreams

It gets tiring to hear the complaints about the allegedly excessive corporate federal tax burden in the U.S., and the need for CEOs to move their offices to more tax-friendly countries. It's just as bad within the states, where budget-strapped governments are forced to make tax concessions to keep big companies from slinking across the border to save a few million dollars. My home state of Illinois is a present-day example. Facing one of the highest budget deficits in the nation, and barely able to keep vital public services functioning, we were forced to give a tax break of $85 million per year to the Chicago Mercantile Exchange (CME), whose profit margin over the past three years is higher than any of the top 100 companies in the nation.

A tax break to the most profitable U.S. company. Absurd. Especially since CME has prospered for over 100 years with the help of Chicago's people, location, and infrastructure. But we don't hear the facts in the mainstream media. Instead, we're reminded of the importance of retaining our job-producing big firms, even though they haven't been producing many jobs.

It's clear that our largest corporations have been avoiding federal taxes. A study by Pay Up Now revealed that the top 100 U.S. corporations paid 12.2% from 2008 to 2010, barely a third of the maximum rate.

Now comes a new study by Citizens for Tax Justice that shows tax avoidance at the state level. The CTJ study, which evaluated 265 large companies, determined that an average of 3% was paid in state taxes, less than half the average state tax rate of 6.2%. The ten states with 10 or more companies in the study all collected between 2.5% and 3.55%: Ohio, Texas, New Jersey, Pennsylvania, Illinois, Minnesota, Virginia, California, North Carolina, and New York. Pay Up Now provides the detail for all states represented by four or more companies.

CTJ notes that “these 265 companies avoided a total of $42.7 billion in state corporate income taxes over the three years.”

To be fair, some major corporations are paying their responsible share of taxes, such as those, in the case of federal taxes, that are part of the medical and pharmacy service industries. Ironically, one of the responsible state-tax-paying corporations is CME. Although maybe there's no irony involved here. Just good old business sense. If the other guy isn't paying, then why should I?

This clamor to avoid taxes is happening at a time when corporations are enjoying record profits. And at a time when corporate income tax as a share of GDP is just ONE-THIRD of the share of GDP in the 1960s.

You corporations have benefited from a half-century of public research, infrastructure, and technological innovation. So pay for it.

GH/DB

(Original Post)

By Pat Garofalo on Dec 16, 2011 at 12:00 pm

One of 2012 GOP presidential contender Newt Gingrich’s favorite claims is that, when he was Speaker of the House in the 1990s, he helped balance the budget four times. In the Fox News debate last night, he said, “as Speaker, one of the reasons some people aren’t happy with some of my leadership is, I actually worked things out with Bill Clinton to get welfare reform, a tax cut, and four balanced budgets signed.”

This is a point that Gingrich drills home in interviews all the time. “If you look at my record, the only Speaker in your lifetime to get to four balanced budgets,” he said during a Fox interview. Watch a compilation:

However, this talking point is much more fiction than fact. For starters, as USA Today noted, “Gingrich was in office for only two of those budget years (fiscal 1998 and 1999). But he continues to claim credit for two balanced budgets that were passed after he left office (fiscal 2000 and 2001).” Furthermore, as Citizens for Tax Justice’s Bob McIntyre wrote, it was actually the 1993 budget, which all Republicans opposed, that laid the groundwork for the balanced budgets that occurred under President Bill Clinton:

    Gingrich’s argument comes down to this: In August 1997, Congress passed a bill called the “Balanced Budget Act,” which promised to balance the federal budget five years later, in fiscal 2002. Soon after the bill was signed, the budget was balanced. Therefore, the balanced budget act balanced the budget. But that’s demonstrably false.

    In fact, the budget surpluses that we enjoyed from 1998 to 2001 had nothing to do with the balanced budget act. Instead, the surpluses stemmed from a dramatic surge in federal revenues, mainly personal income taxes. Here’s what really happened.

    In 1993, Bill Clinton undid some of the Reagan tax cuts for the wealthy, in a bill that every Republican in Congress opposed…Clinton’s 1993 increase in tax rates on high earners applied to a new wave of taxable income from corporate executives cashing in their lucrative stock options (which are taxed as wages). In fiscal 2000, the surplus peaked at $237 billion, and it remained a robust $128 billion in fiscal 2001 (Clinton’s last budget year).

    All of these surpluses would have occurred if the Balanced Budget Act had never been enacted.

Gingrich told anyone who would listen that Clinton’s 1993 tax increase would destroy the economy, but just the opposite happened.

Center for American Progress Director for Tax and Budget Policy Michael Linden has actually found that legislation passed by Gingrich’s House Republicans made the budget picture worse in the 90s, not better. “Gingrich and his Republican Congress had nothing at all to do with balancing the budget in 1998. In fact, the net effect of their efforts was to make the fiscal situation slightly worse,” Linden noted. But that hasn’t stopped Gingrich from trotting out the fact that budgets were balanced while he was Speaker in an attempt to bolster his fiscal bona fides.

(Original Post)

By Robert Longley, About.com Guide   December 16, 2011

If your state, like most states, is hurting for money and is putting the squeeze on you for more, then this news will not make it hurt any less. A new report from the Citizens for Tax Justice (CTJ) identifies 256 Fortune 500 corporations which, while racking up $1.33 trillion in profits during 2008, 2009 and 2010, managed to pay little or no state income taxes during those three years.

In its report, Corporate Tax Dodging in the Fifty States, CTJ profiles 68 of the 256 Fortune 500 corporations that paid no (zero) state corporate income tax in at least one of the past three years and 20 corporations that averaged paying a zero tax rate or less during the 2008-2010 period.

Had those corporations paid their full tax share, CTJ estimates the combined 50 states would have collected $82.6 billion over the three-year period. Instead, says CTJ, they paid only $39.9 billion in state taxes while avoiding paying $42.7 billion.

Some of the 20 corporations that managed to pay zero or less in state corporate income taxes during 2008-2010 were: Utility provider Pepco Holdings (D.C.); pharmaceutical maker Baxter International (Illinois); chemical maker DuPont (Delaware); fast food maker Yum Brands (Kentucky) and high tech manufacturer Intel (California).

For example, California-based Intel reported making a net profit of $9.3 billion over the years 2008 and 2009. Over those two years, Intel not only paid no state taxes, California paid it $40 million in tax refunds, resulting in an effective -0.4% tax rate for Intel over the period.

In Corporate Tax Dodging in the Fifty States, CTJ identifies three reasons for steadily declining state corporate tax revenues. First, corporations continue to ask for and state lawmakers continue to grant corporate tax subsidies and credits, most of which fail to produce their promised economic results. Second, federal tax breaks enacted in the past decade further reduce state corporate income tax revenues since states generally accept corporations' federal tax numbers. Third, the largest, multi-state corporations devote increasingly more money and "legal firepower" to developing and lobbying for tax breaks.

As the report's co-author Matthew Gardner of CTJ's Institute on Taxation and Economic Policy said of the tax-avoiding corporations, "They're so busy avoiding taxes, it's no wonder they're not creating any new jobs."

Just to be Fair: On the other hand, all of these corporations, despite paying little or no corporate state taxes, employ thousands of people in these states who spend their money in these states and, in all but nine states, pay state income tax. Indeed, in many cases, the overall economic benefit these corporations provide to their states may equal or even outweigh the state taxes they do, or do not pay. In other words, don't look for California to ask Intel to pack up and move to Texas anytime soon.

(Original Post)

5:51 PM, Dec. 15, 2011

Written by Bill Minor

Among the outlandish bills sponsored by Republican lawmakers I had mentioned a couple of weeks ago was one that would have repealed (yes, repealed) the state income tax on corporations.

It didn't pass. Now don't be surprised if the bill resurfaces when the GOP takes over the Legislature in January.

Is it mere coincidence that new Republican governors in South Carolina and Florida have proposed the same idea as a priority in their 2012 legislative sessions?

As the corporate no-tax push in Republican legislatures seems gaining headway, a timely new report has been issued by two non-profit tax study groups. It shows that a high percentage of major companies dodged state corporate income taxes during a three-year period beginning in 2008.

Citizens for Tax Justice and the Institute on Taxation and Economic Policy studied returns of 265 corporations among the Fortune 500 that disclosed what they paid in state and local income taxes during the three-year period.

Sixty-eight of the 265 companies paid no state income tax in at least one of the three years, and it was not because they didn't make any money. According to the study, the companies reported to their shareholders they made $117 billion before paying any federal taxes. Sixteen of the companies paid no state income tax in all three years.

The CIJ-ITEP report confirms what was learned down here last February.

I reported findings of the legislative Performance Evaluation and Expenditure Review Committee of what the 150 largest corporations in Mississippi paid in state income taxes for 2006- 2009.

PEER found that in 2006 of 130 top companies, 91 paid no income tax and that in the next three years, 103 of the 130 largest employers reported they had paid zero state corporate income tax.

State Rep. Cecil Brown, D-Jackson, who headed the House Education Committee, had requested the PEER study as he desperately sought sources of revenue to ward off deep cuts in the Adequate Education Program. Brown, who in the 1990s served as state budget officer, had sought assistance from a tax attorney for the Alabama Education Association who helped close corporate tax loopholes in that state.

Brown concluded that many of the corporations had managed to pay little or no state income tax by hiring top lobbyists and tax experts to find loopholes in the tax code.

Brown's effort at the 2011 session went nowhere, but he did get information from the tax commission that it has gone after some of the tax-avoiding corporations and had three lawsuits seeking to plug loopholes. We've yet to find out how successful the commission has been.

As the Department of Revenue noted in its memo to Brown, Mississippi's top corporate tax rate - 5 percent for the last 25 years - is lower than many other states.

Iowa and Pennsylvania, mentioned in the Commission memo, have a 9 percent-plus rate. Nearby Arkansas has a 7 percent top corporate rate.

That states in general have kept corporate income tax rates low is pretty much confirmed in the CTJ-ITEP study which shows nationwide corporate taxes average 6.2 percent. The tax study made by the two groups showed that no matter what the state tax rates are, the companies studied paid only an average 3 percent in corporate income tax.

Mississippi has notoriously been known for giving away the store to lure industry. When and if the Legislature wipes out the corporate income tax entirely, it's obvious lawmakers would be shifting the state's tax burden even more so to the state's huge poorer population in the form of the 7 percent sales tax.

Is that what some politicians call a fair tax system?

(Original Post)

Carolyn Lochhead, Chronicle Washington Bureau

Thursday, December 15, 2011

Silicon Valley technology firms that are lobbying Congress to slash taxes on money they bring home from abroad, arguing that doing so would help them create millions of jobs, already send more than half that money back to the United States without paying taxes, according to a Senate investigation released Wednesday.

A wrinkle in the corporate tax code permits Google, Cisco, Apple, Adobe Systems, Oracle and other U.S. multinational corporations surveyed to invest nearly $250 billion in the United States without paying the 35 percent corporate tax rate that applies to repatriated foreign earnings, according to the report by the Senate's Permanent Subcommittee on Investigations.

The corporations, which are not allowed to invest the money in their own companies, can escape the 35 percent tax if they invest in other domestic assets, such as stocks, bonds and bank deposits.

"They've been able to take advantage of the safety and security of the U.S. financial system to protect their money while deferring the payment of U.S. taxes on those funds, taxes which are needed to support our U.S. system," said Sen. Carl Levin, D-Mich., who chairs the subcommittee.

Under current law, money corporations earn abroad is free from U.S. taxes until it is returned to the United States. Silicon Valley's technology giants have banded together with pharmaceutical companies and other multinationals in the Win America Coalition in an attempt to get Congress to cut their tax rate from 35 percent to just over 5 percent on overseas earnings they bring home.

Tech company lobbyists, arguing that the money is "trapped" abroad by the 35 percent tax, have said the tax holiday is one of their top priorities in Washington. Data in the committee's report came from its survey of 27 U.S. multinational corporations; overall, the firms are estimated to have $1.4 trillion parked abroad, much of it in tax havens.

The survey data showed that Adobe, Apple, Broadcom, Cisco and Google have invested 76 to 100 percent of their foreign earnings in U.S. stocks, bonds, bank deposits and other domestic assets, a greater share than the other companies surveyed.

Oracle has invested more than half its foreign earnings in U.S. assets, the report said.

Such large domestically invested sums mean that estimates of job growth from a so-called tax holiday would be far lower than the companies have claimed. That's because the money is already being put to work in the United States.
Huge cash reserves

Levin said the companies' public financial filings show that they have huge cash reserves if they wish to expand.

On Wednesday, the Win America group issued a statement acknowledging that its member corporations keep deposits of their foreign subsidiaries in U.S banks and bonds, but added that "does not mean that their American parent companies are able to deploy these funds in the U.S. economy."

The group said it would "be better for the U.S. economy if American companies could actually put this money to work in our domestic economy," and said Levin's "one-sided, partisan report does nothing but attempt to score rhetorical points while U.S. profits continue to be invested around the world instead of here at home due to a seriously flawed tax code."

Sen. Barbara Boxer, D-Calif., helped pass a tax holiday on repatriated foreign earnings in 2004. She is a co-sponsor of a similar proposal now by Sens. John McCain, R-Ariz., and Kay Hagan, D-N.C. Levin is a leading critic of the idea. Rep. Kevin Brady, R-Texas, is sponsoring the House version.
Bipartisan support

A tax holiday has significant bipartisan support from members of Congress desperate to find something they can agree on as a way to boost the economy.

The Win America Coalition has recruited top economists, including UC Berkeley Professor Laura Tyson, a former Clinton administration economist, and Douglas Holtz-Eakin, past director of the Congressional Budget Office and adviser to McCain during his 2008 presidential run, to show how a tax holiday would inject hundreds of billions of dollars into the economy and create jobs.

Independent tax analysts have widely panned the idea. Numerous academic studies of the Boxer tax holiday showed that the companies spent most of the money they brought back after 2004 on shareholder dividends, stock buybacks and executive pay, while some of the companies actually cut jobs.

Interest groups as disparate as the conservative Heritage Foundation and the liberal Citizens for Tax Justice strongly oppose another tax holiday, in part because of evidence that the last one encouraged multinationals to send more of their earnings overseas, in anticipation of another tax holiday.
Unfair advantage?

Domestic corporations that do not have overseas subsidiaries argue that it is unfair to give multinational companies a 5 percent tax rate.

An October report by the Senate subcommittee found heavy use of tax havens by Silicon Valley companies, with 94 percent of the $3.3 billion that Oracle repatriated after the 2004 tax holiday coming from a shell subsidiary in Ireland, while Intel brought most of its money back from a subsidiary in the Cayman Islands.

Tax experts said technology and pharmaceutical companies are especially well-positioned to use overseas tax strategies because they operate globally and rely on patents and other intellectual property that is more easily transferred among subsidiaries than hard assets, and harder for tax authorities to value.

(Original Post)

First Posted: 12/14/11 04:33 PM ET Updated: 12/14/11 04:33 PM ET

Jordan Howard

WASHINGTON -- A new report by the Institute on Taxation and Economic policy, a non-profit and non-partisan research organization based in Washington, D.C., found that state governments are collectively losing out on over $10 billion in transportation revenue each year due to state lawmakers' reluctance to update gas taxes in their states.

The report also found that every year the national economy loses an estimated $130 billion due to higher vehicle repair costs and and travel time delays.

Despite these apparent costs, the negative associations of the word "tax" makes politicians less likely to enact appropriate legislation.

"Unfortunately, many politicians won't consider touching the gas tax," said Carl Davis, senior analyst at ITEP and author of the study. "They are raising sales taxes, fees on vehicles, tolls on roads, even looting education funds, all to make up for the stagnant gas tax. But they can't bring themselves to modernize the biggest source of transportation revenue that's actually under their control. It makes no sense."

The revenue source continues to be neglected even as states are facing their lowest revenues since The Great Depression and state and local governments are cutting jobs and services.

At the same time, a recent report by Citizens for Tax Justice found that 68 large, multinational corporations have avoided paying state income taxes over the past ten years.

This neglect extends up to the federal level, where Congress hasn't raised the federal gas tax since 1993. Because of this, the gas tax has lost 41 percent of its value in the last 18 years.

The report goes on to say that while taxes on fuel have not been raised, the cost of infrastructure such as roads and bridges has continued to go up, and often at a rate higher than inflation.

"It's basic math," said Davis. "The road repairs you could buy in 1990 with 20 cents, for example, are going to cost 34 cents today. But we still see some states collecting the same flat 20-cent tax that they did back in 1990. That's the definition of unsustainable."

In an effort to make a raise in the gas tax more attractive to lawmakers, the report offers three specific policy recommendations to modernize state gas taxes:

    1. Increase gas tax rates to (at least) reverse their long term declines. The appropriate contemporary rate for each state will depend on transportation funding needs as determined by lawmakers and the public.

    2. Restructure state gas taxes so that their rates rise automatically alongside the inevitable growth in the cost of transportation construction projects. If every state had restructured the last time it raised its gas tax, total state gas tax revenues would be over $10 billion higher per year.

    3. Create or enhance targeted tax credits for low income families to offset the impact of gas tax reform.

(Original Post)

December 14, 2011, 5:39 PM ET

By Christopher Matthews

A proposed “repatriation tax holiday” that would allow  U.S. multinational corporations to bring home out-of-country profits at a lower tax rate has led anti-corruption organizations to join an opposition group of odd bedfellows.

Sen. John McCain (R., Ariz.), Sen. Kay Hagan (D., N.C.), and others have proposed legislation that would allow profits brought into the country from abroad at a reduced tax rate. They argue the influx of offshore profits would help create jobs.

On Tuesday, the Financial Accountability and Corporate Transparency Coalition, Global Financial Integrity, Public Citizen and other good governance groups signed onto a letter to Congress Tuesday railing against the tax holiday. They were joined by a smorgasbord of religious groups like the Pilgrim United Church of Christ Carlsbad, Calif. and tax reform groups like Citizens for Tax Justice. Even the Heritage Foundation has come out against the holiday.

Most oppose the tax holiday on the grounds that it would not lead to an increase in domestic investment, but would be used by companies to reward shareholders, largely through dividends and stock buybacks.

Spokesmen for McCain and Hagan didn’t immediately respond to requests for comment.

You might ask why anti-corruption groups would care about a tax holiday for offshore profits. For that, we’ll turn to Sen. Carl Levin (D., Mich.).

A study commissioned by the Senate Permanent Subcommittee on Investigations, which Levin chairs, found that during a similar holiday in 2004, much of the money brought back came from offshore tax havens, and in the years since companies have increased the amount of money they keep in tax havens.

Tax havens are one of Levin’s pet peeves. In addition to shielding companies from their tax responsibilities in the U.S., tax havens also bad for law enforcement, according to Levin, because many lack strong money laundering controls and have secrecy barriers that make it difficult for investigators, among other things.

Levin has been out in front of this issue for a while. In July, he re-introduced the Stop Tax Haven Abuse Act, which would close tax loopholes and establish legal presumptions to overcome secrecy barriers, among other things.

“The Senate Permanent Subcommittee on Investigations, which I chair, has spent more than a decade exploring how offshore tax havens conceal wealth, distort commerce, and abet crime, money laundering and corruption,” Levin said during a speech in April. “The truth is that tax havens have declared economic war on honest countries, including the United States by helping U.S. taxpayers dodge U.S. taxes and rob the U.S. Treasury of needed funds.”

Essentially a tax holiday would encourage abuse of tax havens, which in turn abet money laundering and corruption, critics say.

But some argue that it’s not fair to conflate tax havens with sketchy, money-laundering locales. Many well-known offshore tax havens (the Cayman Islands, the Bahamas, Liechtenstein, and others) have been removed from the Financial Action Task Force’s blacklist of countries not up to snuff on anti-money laundering laws.

A spokesman for McCain didn’t immediately respond to requests for comment. In a statement provided to Dow Jones, Hagan said bringing profits back at a reduced tax rate was better than leaving them offshore.

“Allowing companies to bring overseas earnings back to the United States and moving towards a territorial tax system would ensure that corporate earnings are back in the United States where they can be monitored, taxed and put to work growing our anemic economy,” Hagan said.

Opponents of the holiday feel differently. Nicole Tichon, the executive director of the Tax Justice Network USA, a tax advocacy group, said that the holiday promotes use of tax havens.

“The policy rewards the worst actors and encourages more secrecy in an already bad system,” Tichon said. “The race to the bottom in terms of tax, gives criminals and corrupt dictators the same tools as big corporations to keep the real location of their assets fluid.”

(Original Post)

Intelligent Investing | 12/14/2011 @ 5:16PM

Chris Barth, Forbes Staff

Thirty large U.S. corporations paid more money to Congressional lobbyists than they paid in taxes from 2008-2010, according to a new report from Public Campaign, a purportedly non-partisan corporate watchdog organization that seeks to reduce the influence of big companies in politics. The report names 30 profitable companies (only one of which paid federal corporate taxes during the period analyzed), with lobbying expenditures ranging from $710,000 to $84.4 million.

The worst offender, according to the report, is General Electric. The company – which drew fire earlier this year when its lack of taxes came to light – spent over $39 million on lobbyists in 2010 alone, to firms like Federal Policy Group and Capitol Tax Partners. The energy giant avoided paying any U.S. taxes, and indeed received tax rebates totaling over $4.7 billion over the three years studied.

PG&E spent the second most on lobbying among the corporations named. In fact, it topped GE’s 2010 totals, spending nearly $45.5 million on lobbying last year. From 2008 through 2010, the company spent just under $79 million on lobbying.

Only one of the companies named in the report paid income taxes during the period analyzed, although even that company paid a tiny fraction of the standard corporate tax rate. FedEx paid $37 million in taxes – good for a tax rate of 1%. During that same period, FedEx spent $50.8 million on lobbying.

The Public Campaign report, which utilizes data from the Center for Responsive Politics, Citizens for Tax Justice and SEC filings, also contains details on corporate campaign contributions and executive compensation. Honeywell had the highest total Federal campaign contributions (from Political Action Committees and employees to candidates and party committees) during the three year period, contributing $5.1 million to Federal campaigns. Honeywell also ranked second to General Electric in compensation paid to top executives in 2010.

The list of the 30 corporations that paid more for lobbying than they paid in U.S. federal taxes follows. To read the full report, including executive compensation and political contributions, click here.

All figures below in millions.
Company     Profits     Taxes     Paid Lobbying
General Electric     $10,460     -$4,737     $84.35
PG&E Corp     $4,855     -$1,027     $78.99
Verizon Communications     $32,518     -$951     $52.34
Wells Fargo     $49,370     -$681     $11.04
American Electric Power     $5,899     -$545     $28.85
Pepco Holdings     $882     -$508     $3.76
Computer Sciences     $1,666     -$305     $4.39
CenterPoint Energy     $1,931     -$284     $2.65
NiSource     $1,385     -$227     $17.47
Duke Energy     $5,475     -$216     $17.47
Boeing     $9,735     -$178     $52.29
NextEra Energy     $6,403     -$139     $9.99
Consolidated Edison     $4,263     -$127     $1.79
Paccar     $365     -$112     $0.76
Integrys Energy Group     $818     -$92     $2.45
Wisconsin Energy     $1,725     -$85     $2.45
DuPont     $2,124     -$72     $13.75
Baxter International     $926     -$66     $10.45
Tenet Healthcare     $415     -$48     $3.43
Ryder System     $627     -$46     $0.96
El Paso     $4,105     -$41     $2.94
Honeywell International     $4,903     -$34     $18.30
CMS Energy     $1,292     -$29     $3.48
ConLway     $286     -$26     $2.29
Navistar International     $896     -$18     $6.31
DTE Energy     $2,551     -$17     $4.37
Interpublic Group     $571     -$15     $1.30
Mattel     $1,020     -$4     $2.81
Corning     $1,977     -$4     $2.81
FedEx     $4,247     $37     $50.81

(Original Post)

What Do ...
... Air Products & Chemicals, Comcast and H.J. Heinz all have in common?

DollarsignsThey're among the 68 companies singled out in a new report for not paying state income taxes for at least one year between 2008 and 2010 in the states where they did business .

Two more companies with significant footprints in Pennsylvania -- Chesapeake Energy and Verizon -- also did not pay state corporate taxes for at least one year, according to research compiled by the Institute for Taxation and Economic Policy (ITEP) and Citizens for Tax Justice, a pair of Washigton-based research and advocacy groups.

The report's author, ITEP Executive Director Matthew Gardner, says there's no intimation of any wrongdoing in the document's findings.The companies' tax situation is the "understandable outcome of a series of decisions made by state and federal lawmakers that are well-intentioned," but don't always have a beneficial effect on states' bottom lines.

Legislative Democrats in Pennsylvania have long pushed to close loopholes in state tax law that enable companies to avoid paying corporate income taxes. Republicans have countered that the state needs to lower its corporate net income tax to make Pennsylvania more attractive to business.

At least one of the companies, Chesapeake Energy, meanwhile, is vigorously disputing the group's claim and says its methodology is flawed.

Read the full results and the text of the report after the bills-paying "Read More" link below.

The Securities and Exchange Commission requires all publicly traded companies to annually file the amount they pay in federal income taxes, heir American pre-tax profits and their nationwide state income tax payments, the report's author, Gardner, said.

Thus, it's impossible to tell from the study how much the companies did -- or did not pay -- in Pennsylvania corporate taxes during the three-year period cited in the report. Pennsylania does not disclose the information.

Based on the study, Air Products paid $25 million in state taxes on profits of $1.3 billion between 2008 and 2010, giving the company an effective tax rate of 1.9 percent during that time period. The Lehigh Valley employer had no-tax years in 2008 and 2010, the study shows.

The study shows that Philadelphia-based Comcast paid $513 million in state taxes nationwide between 2008 and 2010 on U.S. profits of $15.2 billion, for an effective tax rate of 3.4 percent. The cable giant had a no-tax year in 2009, the study shows.

Chesapeake, which is among the companies participating in Pennsylvania's Marcellus shale natural gas boom, received a $173 million rebate on U.S. profits of $8.3 billion, the study showed. The company had a 3-year effective tax rate of -2.1 percent between 2008 and 2010.

According to Gardner, the companies are the beneficiaries of tax laws that give breaks to firms that make large investments in infrastructure and equipment.

Utilities, such as Verizon and Chesapeake, are required to make regular infrastructure investments. That, according to Gardner, raises the question of whether the companies are doing it to receive the tax break or are receiving tax breaks for something they would have done anyway.

In an e-mail, Chesapeake vigorously disputed the report's methodology, arguing that "the person that put this information together clearly does not understand the difference between income tax expense for financial accounting purposes (Book) and the actual income taxes paid by taxpayers."

"The numbers they utilized are actual numbers from our financial statements, but the numbers are being improperly utilized," the company said.  "Furthermore, they are not consistent in their approach to examining the improper number ...  Chesapeake did not receive $173 million in state tax refunds over this period.  Book numbers are calculated using a completely different set of rules than those used for determining a taxpayer's actual cash tax liability."

According to data compiled by the state Department of Revenue, Pennsylvania companies paid $39.4 million in corporate taxes in November, which was $24.2 million less than anticipated. Year-to-date corporate tax revenues were $750.7 million, which is $167 million, or 18.2 percent less than anticipated.

Six months into the current fiscal year, the state has collected $9.4 billion in general fund revenue, which is $345.3 million, or 3.6 percent less than anticipated.

(Original Post)

12:00am on Dec 13, 2011; Modified: 6:21am on Dec 13, 2011

Businesses and individual Kentuckians who paid state income taxes the past three years may be left with thoughts inappropriate to this charitable season as a result of the news that Yum Brands paid little, if any, state taxes during the same period.

The Louisville-based corporate parent of Kentucky Fried Chicken, Taco Bell, Pizza Hut and other brands paid a state income tax rate of negative 2 percent in 2008, 0.3 percent in 2009 and 0.9 percent in 2010, resulting in a three-year rate of negative 0.4 percent. A negative rate usually brings a tax refund from an earlier year.

Unfortunately, we don't know what it paid in Kentucky because Securities and Exchange Commission reporting doesn't require a state-by-state breakdown and Kentucky doesn't publish information about taxes paid by corporations.

But it's probably safe to assume that it's below the 6-percent rate that corporations with more than $100,000 in taxable income and individuals with moderate incomes are assessed.

None of the publicly held, Kentucky-based companies examined in "Corporate Tax Dodging in the Fifty States, 2008-2010," a report released last week by economic justice advocacy groups, came anywhere near the 6 percent rate in their three-year average.

Ashland Inc. came in at 1 percent, Humana at 3.4 percent and Kindred Healthcare at 3.6 percent. Again, these numbers represent taxes paid in all states, so we don't know the contribution to Kentucky.

It would be easy to write a screed about the disconnect between highly paid executives (Yum CEO David C. Novak's compensation, not including perks such as use of the company jet, amounted to $51.746 million those three years), but that is really a different issue.

Novak, and his fellows in other companies, are doing what they're paid to do, maximizing profit by operating their companies as effectively and efficiently as they can, which includes minimizing taxes paid. Their obligation is to shareholders not to states, citizens or taxpayers — despite Yum's self-characterization as "a company with a huge heart."

The real problem here is with the people who are obligated to look out for the best interest of Kentucky's citizens and taxpayers: the governor and members of the legislature. They, after all, create the tax law that allows this to happen. The report offered some suggestions:

¦ Let's start with transparency. Requiring Yum and the others to disclose what they pay in Kentucky taxes would be a step forward. This isn't just about public shaming. Without this information, it is impossible to understand the impact of tax changes on the companies and state revenue.

¦ Another fix is what's called combined reporting. Parent companies that do business in multiple states through subsidiaries can shift profits to the lowest-tax state. With combined reporting they are treated as a single corporation for state tax purposes and so can't play that game. The Legislative Research Commission has calculated that Kentucky could gain $27 million to $54 million in revenue each year if it had combined reporting as 23 states do.

¦ A related initiative is a "throwback rule," which provides that revenue that isn't captured under any state's code is thrown back to the home state.

¦ Finally, Kentucky must continue to examine closely all the tax giveaways it affords corporations, including automatically adopting those passed at the federal level. The state budget director's office calculates that next year Kentucky will grant $292 million in corporate income tax breaks, which are expected to grow to $310 million by 2014. The long-term effectiveness of many of those tax exemptions has never been studied.

On this last point, many rely on anecdotal evidence about employment and investment, saying it proves these incentives are good for Kentucky.

But, consider this: Individual taxpayers and smaller businesses that can't afford a team of accountants to navigate tax policy also make serious contributions to our state's welfare by hiring people, raising and educating children, maintaining their property, paying their bills, volunteering and otherwise contributing to their communities.

Certainly they do as much good for Kentucky as this handful of huge companies. And for that, they deserve a tax system that treats them fairly.

(Original Post)

Jillian Berman First Posted: 12/12/11 05:59 PM ET Updated: 12/12/11 05:59 PM ET

In a world filled with bulging budget crises and anti-tax rhetoric sits the looming problem of how to obtain the revenue at all.

Tax evasion accounts for more than $3 trillion, or about five percent of, world gross domestic product, according to a briefing paper from the Tax Justice Network. The tax evasion activity is largely the result of shadow economies around the world and has some, but not everything, to do with the existence of tax havens, the report found.

To put the expense into perspective, tax evasion costs countries around the world more than half of what they spend on health care, according the paper. The U.S. is the biggest loser from tax evasion in absolute terms, the report found, while Bolivia loses the most from tax evasion as a proportion of its health care budget.

The problem may only get worse. Shadow economies around the world are poised to grow; the Organisation for Economic Cooperation and Development predicts that the shadow economy will employ more than two-thirds of the world's workers, up from the OECD's 2009 estimate of half the world's workers.

The report mirrors others that indicate tax evasion is costing governments around the world big time. Multi-national corporations' ability to avoid taxes both legally and illegally has cost developing countries hundreds of billions, according to a recent report from the European Network on Debt and Development. Sub-Saharan African countries alone lost nearly $27 billion due to "trade misplacing" or when companies manipulate trade access borders for profit, the ENDD report found.

But developing countries aren't the only ones losing out from tax evasion. Thirty of America's most profitable companies paid less than zero in income taxes in the last three years, according to a report from the Citizens for Tax Justice released last month. The financial sector alone netted $222.7 billion in tax subsidies, the report found -- the largest share of any industry.

And corporations are working to get more subsidies. Apple, Google and other corporate giants have hired more than 160 lobbyists to press lawmakers for a tax holiday on more than $1 trillion in offshore profits, according to Bloomberg.

Some rich Americans have also become adept at avoiding taxes as well. That could soon change, however. Swiss and U.S. officials met in Switzerland over the weekend and they're getting closer to a deal about wealthy Americans using Swiss bank accounts to dodge taxes.

(Original Post)

By Danielle Douglas, Published: December 11

Some of the Washington area’s biggest public companies paid little to no state income taxes by using a myriad of tax breaks and other tactics, according to a research report released last week.

Citizens for Tax Justice and the Institute on Taxation and Economic Policy examined 265 profitable Fortune 500 companies, nine of which are based in the area, and found 68 reported paying no state taxes in at least one of the past three years. Some even wound up with negative tax rates by exploiting the tax codes.

CSC, a Falls Church-based technology firm, netted $939 million in profits from 2008 through 2009, but had a negative 17.8 percent tax rate. District-based utility Pepco Holdings took in $779 million during the same period, and carried a negative 13.2 percent rate.

“The accelerated deduction of [Pepco’s] capital investments and significant cash contributions the company made to the employee pension retirement plan are the primary reasons for [Pepco’s] negative rate,” said Pepco Chief Financial Officer Anthony Kamerick.

“It is important to recognize that we paid many other taxes — real estate taxes, payroll taxes, personal property taxes, delivery taxes, use taxes and gross receipts tax” to the tune of $1.2 billion between 2008 and 2010, he said.

Officials from CSC did not respond to requests for comment.

According to the study, the average state corporate tax rate is 6.2 percent. Maryland has a 8.25 percent corporate tax rate, Virginia’s is 6 percent and the District’s is 9.9 percent. The report data only calculates how much companies paid in total, not individual, state taxes.

The 265 companies included in the report earned a combined $1.33 trillion in domestic profits over the past three years, but managed to pay only an average 3 percent in state taxes across the country. Researchers say these companies reduced their state taxes by some $42.7 billion during that period.

Lawmakers routinely enact tax breaks to lure companies from other states and promote economic development, while corporations have become deft at finding tax shelters, said Matthew Gardner, executive director of the Institute on Taxation and Economic Policy.

The report arrives amid an ongoing debate about corporations paying their fair share in federal taxes. The authors of the study issued a report in November looking at the same corporations’ federal tax activity, with similar findings.

“These reports highlight the damage corporate tax loopholes are doing and hopefully will get lawmakers talking about ending give-aways,” Gardner said. “Our revenues aren’t keeping pace with our investments at the national level, and we need more money to pay for the vital public services we all say we want. ”

(Original Post)

Monday, December 12, 2011

By John Gramlich, Stateline Staff Writer

ECONOMY & BUSINESS BEAT

Even as states cut services because of tight budgets, they are forgoing billions of dollars in revenue that they could be collecting from big, profitable corporations — some of which have paid little or no state corporate income taxes over the past three years, according to a new report.

DuPont, Intel, Goodrich and International Paper are among the Fortune 500 firms that paid no net state taxes on their income between 2008 and 2010, according to the study. The report, released December 7, was the work of the Institution on Taxation and Economic Policy and Citizens for Tax Justice, a pair of Washington-based think tanks that advocate for more progressive tax systems. Dozens of other companies did not pay state corporate income taxes in at least one of the three years examined, the study finds.

The two research groups examined annual financial reports from 265 of the 280 profitable firms on the Fortune 500 list and found that, on average, the companies paid taxes equivalent to about 3 percent of their domestic profits. That is less than half of the 6.2 percent average state corporate income tax nationally. If the full 6.2 percent rate had been applied to these firms’ $1.33 trillion in U.S. profits over the three years examined, states would have collected $83 billion. Instead, they collected less than half that amount.

The study sees three main reasons for what has been an ongoing decline in state corporate income tax collections: the common practice of states pegging their tax codes to the federal government’s; the proliferation of state-level tax credits granted to individual companies or whole industries; and crafty accounting maneuvers that allow companies to avoid or reduce their state tax obligations.

“Piggybacking” on the federal tax code — by using the same definition of “taxable income” that the federal government employs, for instance — allows states to simplify their own process of collecting taxes. The tradeoff, according to ITEP and CTJ, is that “every new corporate loophole that gets tucked into the federal code will also erode the state tax base.”

“Even if these federal tax breaks, many of which are ostensibly designed to encourage business investment, are having an effect nationally,” the study says, “it makes little sense for any state to piggyback on a tax cut that could encourage investment anyhere in the United States.”

Beyond federal credits that automatically find their way into state tax codes, states have approved a plethora of their own corporate tax breaks. These can help individual companies — Sears, for example, has been angling for a tax-break package in Illinois — or whole industries. Some states have gone further: Michigan this year approved a wholesale revision of its corporate income tax, reducing the liability for companies around the state.

Meanwhile, big corporations with many subsidiaries have also avoided state taxes by using accounting maneuvers that shift profits “from the states in which they are actually earned into states that tax them at lower rates or not at all,” the study finds. The report notes that, since 2004, seven states have banned this practice by treating companies and their subsidiaries as one corporation, collecting taxes on their combined profits.

“Economy & Business Beat” provides a quick analysis of recent economic development news in state government. Click here to find Stateline's daily roundup of economy and business news.

(Original Post)

Mon Dec 12, 2011 2:5PM GMT

The U.S. government is deeply dependent on tax revenues to reduce its $1.3 trillion budget deficit. However, the super rich in America are not paying their fair share of taxes.

Tax Inequality

More than 1,400 millionaires paid no U.S. income taxes in 2009, according to an August 2011 report from the Internal Revenue Service. Huffington Post

Twenty five percent of all American millionaires pay a smaller percentage of their income taxes than millions of middle class households. Huffington Post

The top 400 earners in the U.S. paid an average tax rate of only 18 percent. Bloomberg

Billionaires aren't the only ones that use loopholes to pay lower taxes. Thirty of America's most profitable corporations used rules like the "active financing exception" -- allowing corporations to sidestep paying taxes on overseas profits if they were derived by "actively financing" some activity or deal -- to pay less than zero in income taxes. Center for Tax Justice

280 most profitable U.S. corporations sheltered half their profits from taxes between 2008 and 2010. Citizens for Tax Justice

A 2011 report issued by Citizens for Tax Justice and the Institution on Taxation and Economic Policy suggest many of the largest U.S. corporations use loopholes and pay lobbyists to significantly reduce the amount of corporate income tax they pay. True Tax Facts

Of WIN America's 58 big firms - led by Citigroup, Hewlett-Packard, Bank of America, Pfizer, Merck, Verizon, Ford, Caterpillar, Dow Chemical, and DuPont -- 43 registered profits every single year through Great Recession hard times while evading taxes.

Lobbying for Tax Cuts

A 2011 study, which examined 280 companies that were profitable for all three years between 2008 and 2010, suggests that inefficiencies of the tax code, using tax loopholes and lobbyist influence have reduced the amount of corporate tax they pay from 35% to 18.5%. True Tax Facts

At the root of the tax evasion problem in America is a system of inverted incentives that encourages corporations to lobby for special tax breaks - and politicians to insert them into the tax code. True Tax Facts

U.S. corporations pay lobbyists. Lobbyists convince lawmakers to add tax breaks. Lawmakers modify the tax code. True Tax Facts

As Head of Americans for Tax Reform since 1986, Grover Norquist has transformed a single issue - preventing tax hikes - into one of the key platforms of the Republican Party. Norquist's biggest coup was getting more than 270 members of Congress, and nearly all of the 2012 Republican presidential primary candidates, to sign a pledge promising never to vote to raise taxes. The pledge will be hindering a solution to America's debt crisis. CBS News

In November 2011, Grover Norquist defended the effectiveness of his anti-tax pledge, and predicted it will help Republicans retain control of the House of Representatives for the next decade. He said the 25-year-old, one-sentence pledge signed by politicians, offers "credibility" to anti-tax promises. US News

WIN America group which includes 18 major corporations and 24 trade associations spent a remarkable $50 million on their “tax holiday” campaign during 2011 by hiring at least 160 lobbyists. Institute for Policy Studies

During 2011, in an attempt to get a "tax holiday" proposal into law, WIN America hired at least 60 former staffers of congressional leaders - with 42 of those formerly employed at the House Ways and Means and Senate Finance Committees, the two panels that write up all America's tax laws. Institute for Policy Studies

A 2004 tax holiday handed 843 U.S. companies a tax break that cost the U.S. Treasury $92 billion. What did American taxpayers get back? Not much. Most of the firms that claimed a tax holiday in 2004 went on to reduce their workforces - almost 600,000. Institute for Policy Studies

Tax Laws

A U.S. debt deal reached in August 2011 in Congress did not include a tax increase on the American rich due to the opposition from Republicans. Reuters

The U.S. Congress and President Barack Obama approved an $858 billion tax deal in December 2010 that critics say added to the budget deficit. Obama Stimulus Benefits

Some economists say extending the tax cuts for the wealthy in the 2010 law will cost about $80 billion by the end of 2012. American Progress

More than half of the total benefit from the tax cuts in 2010 alone accrued solely to the richest 5 percent of Americans with the middle 20 percent of Americans reaping only 7 percent of the benefit. American Progress

Payroll Tax

Payroll tax generally refers to two different kinds of similar taxes. The first kind is a tax that employers are required to withhold from employees' wages, also known as withholding tax and the second kind is a tax that is paid from the employer's own funds and that is directly related to employing a worker, which can consist of a fixed charge or be proportionally linked to an employee's pay.

Democratic and Republican lawmakers are trying to reach a deal over a temporary payroll tax cut that is set to expire at the end of December 2011. CBS News

The Obama administration says the Social Security payroll tax cut is projected to cost about $112 billion in 2012. The administration says the money that would have gone to the trust fund would be made up from general revenues, with "no effect on individuals' current or future Social Security benefits." CNN

Social Security paid out $712 billion in benefits and took in $663 billion in taxes in 2010, leaving it with a revenue shortfall of $49 billion. That's according to figures released in August by the system's trustees. But interest on its trust fund added another $117 billion, bringing the trust fund's total balance to $2.6 trillion. CNN

Under current projections, the trust fund -- created in the 1980s to prepare for the retirement of the Baby Boom generation -- will run out in 2036, the trustees reported in May. At that point, the remaining income will pay about 77% of scheduled benefits. CNN

Republican presidential candidate Rep. Michele Bachmann warned in December 2011 that the Social Security payroll tax cut "blew a hole" in the trust fund. Supporters of the tax cut says Bachmann is correct in saying the payroll tax cut will require a transfer from the Treasury to replace the money that would have otherwise gone to the Social Security trust fund. But she's mistaken when she says there's not enough money in the trust fund to cover current benefits. CNN

The Democratic plan on payroll tax cut extension in December 2011 would give a worker earning $50,000 a more than $1,500 tax cut; the GOP plan would provide a $1,000 tax cut for such an earner. A two-income family making $200,000 would reap a $6,000-plus tax cut under the Democratic plan and a $4,000 tax cut under the GOP version. Boston.com

ARA/HJ

(Original Post)

By Sterling Wong    December 12, 2011 03:43 PM

America’s corporate tax rate, at 35%, is too high: That’s the refrain that Republican presidential hopefuls from Mitt Romney, Newt Gingrich, Rick Perry to Ron Paul have consistently repeated as they campaign for the GOP nomination.
 
But, as detailed by the New York Times, though the nominal federal corporate tax rate is indeed high (second highest in the world, in fact), but by taking advantage of the various loopholes and available tax incentives, few -- if any -- big business in America actually pay the 35% tax rate. Honeywell International (HON), for example, paid income taxes worth about 15% of its profits.
 
And now, a new study conducted by the Institution on Taxation and Economic Policy and Citizens for Tax Justice, two Washington non-partisan think tanks, revealed that even at the state level, big corporations have been able to avoid high tax rates.
 
According to Stateline, the study, helpfully titled “Corporate Tax Dodging in the Fifty States, 2008-2010,” looked at financial reports from 265 of the 280 profitable Fortune 500 companies, such as DuPont (DFT), Intel (INTC), Goodrich (GR) and International Paper (IP), and found that these firms paid on average just about 3% of their domestic profits in state taxes -- which is more than 50% less than the national state corporate income tax rate of 6.2 percent, costing states some $83 billion in lost tax revenue.  
 
The study found three central reasons for the steady decline in state corporate income tax revenues: the tendency for states to link their corporate tax rates to those at the federal level; the frequency of state-granted corporate tax incentives; and the common practice of profit shifting that allows companies to cut down their state tax liabilities.
 
“Piggybacking” on the federal tax code — by using the same definition of “taxable income” that the federal government employs, for instance — allows states to simplify their own process of collecting taxes. The tradeoff, according to ITEP and CTJ, is that “every new corporate loophole that gets tucked into the federal code will also erode the state tax base.”

“Even if these federal tax breaks, many of which are ostensibly designed to encourage business investment, are having an effect nationally,” the study says, “it makes little sense for any state to piggyback on a tax cut that could encourage investment anyhere in the United States.”

Beyond federal credits that automatically find their way into state tax codes, states have approved a plethora of their own corporate tax breaks. These can help individual companies — Sears, for example, has been angling for a tax-break package in Illinois — or whole industries. Some states have gone further: Michigan this year approved a wholesale revision of its corporate income tax, reducing the liability for companies around the state.
 
And as for profit shifting, what corporations have done is shift to transfer their profits on paper from the state in which it was earned to one which has lower tax rate or does not even collect taxes at all.
 
While the question of whether high or low corporate tax rates continues to be hotly contested by liberal and conservative economists, it seems that at least one thing is certain: Life is good if you’re a big business.

(Original Post)

By JULIE DELCOUR Associate Editor
Published: 12/11/2011  2:26 AM
Last Modified: 12/11/2011  2:59 AM

Oklahoma and every state that struggled mightily through recent recessionary times, might have had a far easier time had major corporations paid their fair share of state income taxes.


But they did not, and that tax avoidance cost states an estimated $42 billion over three years, according to a new report, "Corporate Tax Dodging in the Fifty States, 2008-2010." The report is a product of the Washington-D.C.-based Institute on Taxation and Economic Policy and Citizens for Tax Justice in conjunction with the Oklahoma Policy Institute.

This crucial analysis, which probably will be roundly ignored by state leaders, arrives at a time when state governments are trying to repair damage from years of layoffs and cutbacks in services.

For the three-year period, the 265 companies studied by report authors, paid state income taxes equal to only 3 percent of their U.S. profits of $1.33 trillion. "Far too many have managed to shelter half or more of their profits from state taxes," said Matthew Gardner, executive director of ITEP.

The average state corporate tax rate is 6.2 percent - 6 percent in Oklahoma. Sixty-eight of the corporations managed to pay no state income taxes on profits during at least one out of the three years but made $117 billion in pretax profits in those no-tax years.

Four Oklahoma companies were among those examined. These energy-related corporations indisputably are good community partners, large employers and pay other types of taxes - gross production, property, sales and royalty taxes.

But here's how they stacked up, according to the report, on state corporate income taxes: In Oklahoma City, Chesapeake Energy paid an effective tax rate of negative 2.1 percent; Devon Energy paid 0.6 percent. In Tulsa, Williams paid 1.0 percent and Oneok paid 1.1 percent.

Had the 265 corporations paid the average state corporate tax rate on profits, their corporate state income tax bill would have totaled $82.6 billion. Instead, they paid only $39.9 billion. "Thus, these 265 companies avoided $42.7 billion in state corporate income taxes over those three years," the report concluded.

For years, the long-term decline in the state corporate income tax, the report claims, has had three root causes: "the trickle-down impact of federal corporate tax cuts, ill-advised tax 'incentives' intentionally enacted by state lawmakers and unintended tax shelters created by companies armed with creative accounting staffs."

OK Policy Director David Blatt points out that the latest findings "are yet another example of a tax base that is increasingly full of holes." Blatt should know; he's spent years analyzing Oklahoma's tax structure and how it often enriches the rich at the expense of others.

"These loopholes create distortions in the economy, since large, multi-state corporations have more resources to pursue tax avoidance strategies and gain an advantage over small business," he said.

No matter how the findings are interpreted it's obvious that the tax burden to support state government is not shared fairly.

State lawmakers certainly have done their part in helping corporations with the artful dodge. "More than half the states continue to offer investment tax credits against their corporate tax more than 30 years after the U.S. government abandoned its investment credit after concluding it was ineffective in stimulating investment," the report points out.

Yet lawmakers continue to enact tax subsidies requested by corporations, most of which don't produce the promised economic results, Gardner said.

Compounding the problem is that federal tax breaks further reduce state corporate income tax revenues since states almost always accept corporations' federal tax numbers.

"And most insidious, is that multi-state corporations themselves devote their money and legal firepower," Gardner said, "to coming up with tax avoidance schemes."

The report does not quantify how much Oklahoma might be losing due to tax avoidance strategies by both state-based and out-of-state corporations. Figures in the report, Gardner said, are aggregate for taxes paid to all U.S. states by each corporation. It is impossible from available numbers to determine specific tax amounts paid by corporations to individual states.

But it's not chump change.

Two years ago, Republican Gov. Mary Fallin won the governorship on a platform of making Oklahoma more business friendly. But how friendly cam state government afford to be when it is struggling to make up for the largest downsizing in Oklahoma history? State education, health care, infrastructure, all are in need - great need.

Some people, Gardner concluded, have studied the wide variety of corporate state-tax avoidance strategies and believe that the state corporate income tax is beyond repair.

"But the truth is that states have lots of tools in their arsenals to revitalize this still-important - and progressive - source of revenue."

But will they use those tools? State taxpayers can continue to tolerate this situation, or they can call upon their elected representatives to take steps to address it. The problem of fair taxation won't fix itself.

(Original Post)

DAVE ZWEIFEL | Cap Times editor emeritus | dzweifel@madison.com | Posted: Friday, December 9, 2011 5:30 am

You probably saw the story a few weeks ago that despite the official 35 percent U.S. corporate tax rate, many of the nation’s most profitable corporations wind up paying little in federal taxes.

Now there’s yet another report that details how little they pay in state taxes as well.

A study of 265 profitable companies on the Fortune 500 list conducted by two nonprofit research organizations — Citizens for Tax Justice and the Institute on Taxation and Economic Policy — found that the corporate tax payments to states have been shrinking precipitously in recent years. In 1980, corporate income taxes made up 9.7 percent of state revenues and now they make up only an estimated 5.7 percent.

Sixty-eight of the firms in the study paid no state corporate income tax in at least one of the last three years and 20 of them averaged a tax rate of zero or less from 2008 to 2010.

The Wisconsin public interest group known as WISPIRG, which worked with the research groups in the study, reported that three Wisconsin corporations were included among the 265 — Rockwell Automation, Harley-Davidson and Kohl’s Department Stores. Rockwell was among the 68 that didn’t pay state taxes in two of the three years.

In fact, according to WISPIRG Director Bruce Speight, Rockwell reported annual profits during the three years of the study totaling $670 million, but actually received tax rebates of $17 million. Headquartered in Milwaukee, Rockwell is the successor to the old Allen-Bradley, whose heirs set up a foundation that is among America’s largest supporters of conservative causes.

Nationally, the giant DuPont corporation reported paying no state corporate taxes for any of the three years in the study.

Matthew Gardner, executive director of the Institute on Taxation and Economic Policy, said that there are several reasons for the diminishing state tax payments. Many states calculate their taxes based on federal taxes, so many recent corporate tax breaks have lowered their collections. Other states have granted their own tax breaks to promote economic development or to lure companies from other states, like we’ve done here in Wisconsin.

The consequence, of course, is that the state tax burden is falling more and more on the individual taxpayer.

Yet we keep getting told that corporations have too high a tax burden, which has prevented them from creating jobs.

It’s beginning to look like this is just one more little white lie.

(Original Post)

Friday, December 09, 2011

Study says havens used to avoid paying the states on income

by C. Benjamin Ford, Staff Writer

Corporations may legally be people, but they’re people who often pay little to no state taxes, even when highly profitable, according to a new study on tax policy.

The study by the Institute on Taxation and Economic Policy and Maryland PIRG, a public policy research group, found that many corporations used tax havens to avoid paying state income taxes, including when their subsidiaries were based entirely within the state.

The report, called “Corporate Tax Dodging in the Fifty States,” found that at least 68 out of 265 corporations paid no state income taxes in any state over a three-year period.

The institute reviewed annual reports and government documents in its analysis.

Lockheed Martin Corp. of Bethesda turned a profit of $13.09 billion over the past three years, and paid $513 million — a 3.9 percent tax rate — during the same period, according to the report. In Maryland, the corporate tax rate is 8.25 percent.

“Lockheed Martin is proud to have operations in all 50 states and at all times is fully compliant with all state and federal tax laws,” said Lockheed Martin spokesman Christopher Williams.

Lockheed officials believe the report’s methodology produced results that were “erroneous and misleading, as it omits important information about legitimate tax deductions available to taxpayers who create new jobs and invest in technology development and manufacturing in the U.S.,” Williams said.

“The tax incentives available to Lockheed Martin are applicable to a broad range of taxpayers and they incentivize job creation, innovation and investment in U.S. manufacturing, which are important to our long-term economic health.”

Several companies, such as Pepco, Comcast and Verizon, do business in Maryland, but are headquartered elsewhere, and paid no taxes in any state, according to the report.

“Individual taxpayers and small businesses in Maryland end up having to pick up the tab when these corporations avoid paying their taxes,” said Jenny Levin, a spokeswoman for Maryland PIRG.

Getting combined reporting legislation passed would solve the problem, she said.

In recent years, legislation has been introduced to require corporations with subsidiaries or affiliates to file a single tax return listing the company's business activity, instead of treating each subsidiary as a separate entity to avoid paying higher taxes. But the measure has failed to pass.

Not everyone agrees that corporations do not pay their share.

“The report is a classic study in misdirection,” said Kimberly M. Burns, president of Maryland Business for Responsive Government.

Corporate taxes are only a portion of the taxes paid by businesses, which also pay property, sales and other taxes, she said.

“Reliance on a company’s corporate income tax as a measure of paying its fair share is a gross simplification of a complex issue,” Burns said.

A recent Maryland PIRG report estimated that each state taxpayer ends up paying an additional $470 per year to cover corporations that do business in the state, but do not contribute to the state tax rolls, Levin said.

“They’re doing business in our state, they’re making money in our state, they’re using our roads and bridges, they’re using our benefits, and they should help pay for them,” she said.

(Original Post)

By Cathy Mckitrick

The Salt Lake Tribune
First published Dec 08 2011 07:33AM
Updated Dec 9, 2011 11:33PM

A new study takes aim at tax-dodging corporations, some with operations in Utah, revealing that from 2008 to 2010, 68 Fortune 500 companies managed to avoid paying any state income tax for one or more of those three years.

The nonprofit Institute on Taxation and Economic Policy (ITEP) was joined by the advocacy organization Citizens for Tax Justice (CTJ) in releasing the 32-page report earlier this week, "Corporate Tax Dodging in the Fifty States, 2008-2010."

In its examination of annual financial reports submitted by 265 profitable Fortune 500 corporations, the study concluded that states collectively missed out on $42.7 billion in tax revenue during the three-year period.

Although such companies have operations all over the country, they do not disclose profits and taxes on a state-by-state basis, the report said.

Some taxpayer advocates argue that states need to offer more corporate tax breaks in order to attract commerce into their communities, but others argue that corporations that do not pay their "fair share" are helping to starve the public school system of much-needed revenue.

Voices for Utah Children, an advocacy group, reviewed the study and concluded that dozens of the companies operating in Utah — including Wells Fargo and Intel — made millions of dollars in profits nationwide but paid 1 percent or less in state income tax during those years. That’s well below the state’s statutory rate of 5 percent.

Efforts to reach representatives of Wells Fargo and Intel were unsuccessful Friday.

Allison Rowland, the group’s research and budget director, said such actions directly impact the state’s future.

"When big corporations don’t pay state income taxes, our public schools have less money," Rowland said in a statement, adding that Utahns who work for these Fortune 500 companies might be surprised to discover they pay state income taxes at a higher rate than their corporate employers.

Rowland said the study can’t measure whether companies paid income tax in Utah given that they are not required to disclose that information.

"Still, it makes clear just how many of them paid little or no state income tax on balance," Rowland said.

While Wells Fargo made $49.7 billion in profits over the three-year period, the bank paid only 0.7 percent in state income tax. But the study also points out that some corporations appeared to pull their own weight — JP Morgan Chase & Co. earned $32.7 billion in profits while paying 9.1 percent in state income tax, and Whole Foods Market earned $834 million and paid out 10.3 percent in state income tax.

The ITEP study ignores a fundamental fact, said Royce Van Tassell, vice president of the Utah Taxpayers Association.

"Corporate income is also taxed a second time as individual income when it gets distributed to shareholders," Van Tassell said. "To say that corporations aren’t paying their fair share is really an anomaly — those taxes are paid for by workers, shareholders and consumers."

Van Tassell advocates trimming corporate tax wherever possible in order to attract business investment into Utah.

But Doug Macdonald, former chief economist for the State Tax Commission and current chief economist and president of Econowest Associates Inc., said cutting corporate taxes would further undermine Utah’s public school funding.

(Original Post)

Posted on December 9, 2011 by Chris Otts

A new report names Louisville-based Yum! Brands as one of 68 Fortune 500 companies that paid no state corporate income taxes in at least one year between 2008-2010, despite earning profits for shareholders.

The report doesn’t say that Yum! has been shorting the state of Kentucky. That level of detail is not available in publicly traded companies’ filings with SEC.

It says that Yum! made $430 million in 2008, yet paid no state income taxes, on balance, that year.

(Yum! spokeswoman Virginia Ferguson said by email that she would see if the company wanted to comment, but she hasn’t followed up.)

The report goes on to discuss specific tax-dodging strategies by corporations, and recounts one battle between the state of Iowa and Yum! unit KFC:

    Most recently, the U.S. Supreme Court declined to
    consider overturning a decision by the Iowa Supreme
    Court that allowed the state of Iowa to tax fast-food giant
    KFC, which avoids having a traditional “physical
    presence” in Iowa by leasing its secret recipe (and logo)
    to independent franchisees based in the state. This series
    of court decisions clearly indicates that many states could
    (and should) do more to prevent companies like KFC
    from using the physical presence standard to avoid
    paying their fair share of state corporate income taxes.
    While almost every state asserts nexus over at least some
    corporations based on economic activities (with
    California, Colorado, Connecticut, New Hampshire,
    Oregon and Wisconsin each adopting an economic
    nexus standard in the last five years), virtually none of the
    states have fully exercised this ability.

Here’s the New York Times’ coverage of the report, which was produced by Citizens for Tax Justice and the Institute on Taxation and Economic Policy.

(Original Post)

Episode: The Madeleine Brand Show for December 8, 2011

A new study by liberal organization CalPIRG looked at the effective tax rate for Fortune 500 companies and found that they largely avoid taxes through loopholes. States are loosing billions of dollars to crafty corporations that work the system. An example is McKesson, the health care company, they paid no taxes yet had profits of $3.1 billion over the last three years. Intel had profits of $23 billion yet also paid no taxes. KPCC's Steve Proffitt will explain the new report.

Madeleine Brand Show: Large corporations pay less than average taxes by taxjustice

(Original Post)

By Alex Johnston
Epoch Times Staff
Created: December 8, 2011
Last Updated: December 8, 2011

A report released on Wednesday found that 68 large companies in the United States paid no state income taxes in at least one of the past three years, and 20 of these companies had a tax rate of zero or less in the same period of time.

The Institute on Taxation and Economic Policy (ITEP) research group’s report evaluated 265 of the Fortune 500 companies that disclosed the state and local income tax records, finding that on average, these firms paid 3 percent on profits in the United States between 2008 and 2010. The average statutory state corporate tax rate is about 6.2 percent.

Forty-four states have some kind of corporate tax in place, with only Ohio, Nevada, South Dakota, Texas, Wyoming, and Washington not having a tax.

“Our report shows these corporations raked in a combined $1.33 trillion in profits in the last three years, and far too many have managed to shelter half or more of their profits from state taxes,” Matthew Gardner, the executive director of the ITEP, said in a release.

A few well-known firms including Pepco, DuPont, Goodrich, International Paper, Intel, and the American Electric Power Co., paid no state income tax between 2008 and 2010, the report said.

Companies that avoided paying taxes in at least one of the three years include Yahoo, Hewlett-Packard, Boeing, Verizon, Wells Fargo, and other prominent firms with name recognition.

In 2009, 32 companies paid no net state income taxes at all, and 105 companies paid half the average on the statutory rate, “meaning that fully one-half of the companies in our sample paid less than half the average state tax rate,” the research group said.

The report noted that if the entire 265 firms paid the 6.2 percent average tax on the $1.33 trillion profits in the United States, around $82 billion would have been paid to states between 2008 and 2010. However, the companies only paid just under $40 billion, meaning that these companies avoided paying a net total of $42.7 billion in foregone revenue.

Companies use a number of methods to circumvent paying state taxes, the research group said, including using new ways of calculating the tax and getting tax breaks for fostering economic development.

“Hardly a week goes by without a state contemplating some kind of new corporate tax break, either as an across-the-board entitlement for all corporations or to attract a high-priority target,” the report said.

The study comes at a time when states are still reeling from the global economic downturn and are having to make tough new cuts to balance their budgets. Many states have been forced to raise taxes and curb spending on infrastructure, education, and lay off jobs.

(Original Post)

Marketplace: Corporations skimp on state, local taxes by taxjustice

Transcript
Interview by
Steve Chiotakis
Marketplace Morning Report for Wednesday, December 7, 2011

Steve Chiotakis: A new study out today shows some of the nations biggest corporations haven't been paying much in state and local taxes. The study's authors include a couple of non-profit organizations that are pushing for a more progressive tax code. Matt Garner is the executive director of Institute of Taxation and Economic Policy. He's here with us now to talk about this from Washington. Hey Matt.

Matt Gardner: How are you doing?

Chiotakis: I'm doing well. How are these big companies avoiding state and local taxes? What are they doing to get out of it?

Gardner: Well, there are a couple of things. One is that state lawmakers, of course, are enacting tax breaks. But really the pernicious thing we're finding here is that big companies are finding ways to create their own tax loopholes. Put another way, lawmakers aren't doing this, the companies are doing it for themselves.

Chiotakis: The companies are doing it for themselves. Do they have some sort of, like a direct line to the state capitols though?

Gardner: Oh, absolutely. We know that state lawmakers, who are obviously creating jobs, have been enacting a lot of pretty poorly thought out tax breaks to try to create them.

Chiotakis: Now these are companies though -- as you say, the lawmakers want these companies to create jobs and they are indeed big economic spenders and drivers for these states. So, I mean, what do you say?

Gardner: Well, yes. Absolutely, lawmakers should be concerned with creating a good economic climate. But, cutting corporate at the state level is a really inefficient way of doing this. If you're going to cut corporate taxes, you're going to have cut education spending to pay for it or hike taxes on everybody else. And it's not at all clear -- when you think about it that way -- that this helps anybody.

Chiotakis: Matt Garner, executive director of the Institute of Taxation and Economic Policy. Thank you Matt.

Corporate Tax Dodging Report Shows Many Highly Profitable Companies Aren’t Paying Fair Share- 12/08/11

WIN Labor Report: December 8, 2011

Workers Independent News daily labor radio newscast

Workers Independent News: Many Highly Profitable Companies Aren’t Paying Fair Share by taxjustice

(Original Post)

Posted December 8, 2011

By Len Lazarick

MarylandReporter.com

A new study finds that at least 68 profitable corporations paid no state income taxes anywhere in the country in one of the last three years, according to their annual reports and official government filings.

Among the major companies on the list that do significant business in Maryland are Comcast, Wells Fargo?, Southwest Airlines, Verizon, General Electric? and Pepco Holdings?, the utility company which paid no state taxes in 2008, 2009 and 2010.

"Individual taxpayers and small businesses in Maryland end up having to pick up the tab when these corporation avoid paying their taxes," said Jenny Levin at Maryland PIRG, the public interest lobbying group that released the study Wednesday.  The report, "Corporate Tax Dodging in the Fifty States," was done jointly by the Institute on Taxation and Economic Policy and the Center for Tax Justice, which generally support more progressive tax policy.

The study found that 265 corporations it reviewed paid only about 3% tax on their corporate profits, while the average corporate state income tax rate was 6.2%. In Maryland, the rate is 8.25%.

The study recommends wide ranging changes in how states tax corporations. This includes adoption of combined reporting and decoupling from federal tax law changes that have lowered federal taxes on corporations.

The report did not disclose what corporations pay to individual states since the companies don't have to and those individual payments are not disclosed by state governments either.

Companies pay higher property, sales taxes

Karen Syrylo, the tax consultant with the Maryland Chamber of Commerce, said the report disregards the other taxes that corporations pay in Maryland, which raise far more money than the corporate income tax and must be paid even when a company is having an unprofitable year.

According to an Ernst & Young study released in July, Maryland businesses paid about $8.8 billion in taxes, but only 10% of that was from the corporate income tax. The largest taxes on Maryland businesses were property taxes ($2.3 billion), sales taxes on items for business use ($1.5 billion), excise and gross receipts taxes ($1.7 billion), licenses and other fees ($1.1 billion), and individual income tax on business income ($800 million).

Kim Burns of Maryland Business for Responsive Government pointed to similar figures and called the study on tax dodging "arrogant and misleading."

"It vilifies corporations that pay taxes and create jobs everywhere in the country," Burns said.

Syrylo pointed out that there are a variety of reasons a corporation might pay no state income taxes. One reason in particular, depreciation on equipment, would heavily impact a utility like Pepco and other companies with major equipment purchases. She also said that companies are allowed to carry forward losses from prior years.

Syrylo said 3% was "a healthy effective tax rate of 3%."

The report on low corporate tax rates comes at a time when a number of Maryland labor, education and nonprofit organizations are organizing an effort to persuade the governor and legislature to take a "balanced approach" to state budget issues. This means not just relying on cuts to services and personnel to balance the next year's budget, but also increasing tax revenues.

The "Save Our State Coalition" is hosting a "community conversation" Monday night at Baltimore City Community College.

(Original Post)

After seven, Joy Cardin's guest says some profitable multi-state corporations are dodging state taxes-across the nation, and here in Wisconsin. Guest: Bruce Speight (SPATE), Director of WISPIRG, the Wisconsin Public Interest Research Group

(Original Post)

Many large U.S. corporations paid little or no state income taxes from 2008 to 2010, according to a new report by the Institute on Taxation and Economic Policy. The Baton Rouge-based Louisiana Budget Project says two Louisiana-headquartered multistate firms are included in the report: New Orleans-based Entergy, which paid state income taxes equal to 1% of its $5.6 billion in reported profits during the three-year period; and Monroe-based CenturyLink, which paid taxes on 1.8% of its $2.9 billion in total profits over the same time period. Louisiana’s corporate tax rate ranges from 4% to 8%, depending on profits. The LBP says combined reporting would close tax loopholes and help level the playing field between large, multistate corporations and in-state businesses. The report looked at 265 Fortune 500 companies that reported profits each of the last three years and whose public filings provided enough information to calculate their domestic profit and the amount paid in state income taxes. It found that some corporations paid state taxes on 3% of their corporate profits, compared to average state tax rates of 6.2%. It’s impossible to determine how much companies paid in specific states, as companies don’t disclose profits and taxes paid on a state-by-state basis, the LBP says. See the full 32-page report here.

(Original Post)

Date: Thursday, December 8, 2011, 2:39pm PST - Last Modified: Friday, December 9, 2011, 6:44am PST

Andy Giegerich

Business Journal staff writer - Portland Business Journal

Intel Corp.    and a state research group disagree over whether the Portland area’s largest private employer has paid state income taxes.

The disagreement stems from a report titled "Corporate Tax Dodging in the 50 States" issued by two Washington, D.C.-based think tanks. The Institute on Taxation and Economic Policy and Citizens for Tax Justice identify Intel as one of several Fortune 500 companies that paid no state income taxes between 2008 and 2010 “despite reporting large profits to their shareholders.” The groups said they based their findings on SEC filings from 265 Fortune 500 companies.

The Oregon Center for Public Policy seized on the findings, saying the report confirms a need for state corporate disclosure laws.

Intel, the Portland area’s largest private employer, said it has paid income taxes during the years the tax groups studied.

“This study uses data from our annual report and there is a fundamental difference in how we report taxes per the annual report and how much tax is actually paid in any given year,” the company said in a statement. “Our facilities are located in states that understand the positive economic impact that major capital investment brings to their state and encourage investment through tax incentives.”

Intel, the company added, has committed more than $18 billion to existing and new fabrication plants and other investments, and the company is expected to hire 4,000 workers in Hillsboro this year.

Chuck Sheketoff, the OCPP’s executive director, responded that it should not only be clear to citizens how much Intel and other companies pay in taxes, but how much those firms save through tax incentives and loopholes.

“Oregonians and residents of other states should not be in the dark as to the extent to which accounting gimmicks, special laws and tax loopholes reduce the tax liability of profitable corporations,” Sheketoff said. “The fact that companies invest in (research and development) is great and the companies themselves presumably benefit from this in the form of greater profits. That should not relieve profitable corporations from supporting the public infrastructure which makes their success possible.”

The researchers found that of the 265 corporations studied, 68 paid no net state income taxes in at least one of the years from 2008 to 2010. Together, the companies made nearly $117 billion in pre-tax profits in the years when they paid no taxes.

Intel, which is based in Santa Clara, Calif., was one of 20 Fortune 500 companies cited in the report. Intel reported $51 billion in revenue last year.

(Original Post)

Thursday, December 08, 2011

Nannette Miranda

SACRAMENTO, Calif. (KGO) -- As the battle rages in California over increasing taxes or cutting state spending, a new report on corporate taxes is raising a lot of eyebrows. A surprising number of very profitable corporations are paying either very low, or even no state income tax.

Among its causes, the Occupy movement has highlighted what it calls "corporate greed." Now it has a study to back up its claims. The Institute on Taxation and Economic Policy and Citizens for Tax Justice found what they call numerous tax dodgers when analyzing returns between 2008 and 2010 from all 50 states.

Averaging the past three years, Healthcare Information Technology firm McKesson actually received a 1.5 percent refund from state income taxes. Marketer Core-Mark Holding was also in negative territory, at negative 1 percent. Silicon Valley giant Intel paid no state income taxes.

All were profitable in each of those years.

"Basically the system is kind of rigged for corporations to have it easier than people," Occupy Sacramento protester Cesar Aguirre said. "So I'm really not surprised at these numbers. But it's really good to have some evidence."

The Institute for Research on Labor and Employments says when corporations pay no or low taxes, there's not enough money to support schools and other government services. The result? Budget cuts and maybe more budget cuts after that.

"This is because we don't have the funds necessary to run this state, so it's extremely important to get the tax base that's due here in California where these companies are able to make these very healthy profits," UC Berkeley Economist Sylvia Allegretto said.

It's important to point out no company is being accused of any wrongdoing. The report says corporations get a lot of help avoiding their tax responsibilities from accounting firms, lobbyists and state lawmakers.

Assm. Roger Dickinson, D-Sacramento, headed a hearing on wealth inequality this week and acknowledges government's role in fostering corporate tax breaks and loopholes, especially when jobs are promised in return.

"I think it's a fair criticism, both at the state and national level," he said. "Over the past decades, we have tended to be much more responsive to those who have influence, who have economic resources and often times at the expense of those vulnerable among us."

Meanwhile there are still more than 2 million Californians out of work, a number that hasn't budged much during the tax period studied.

(Original Post)

By Beth Healy |  Globe Staff  

December 08, 2011

Sixty-eight out of 265 Fortune 500 companies across the country paid no state corporate income taxes in at least one of the last three years, according to a new report.

The companies included in the study - including EMC Corp. and Raytheon Co. of Massachusetts - earned a combined $1.33 trillion in profits over the last three tax years and managed to shelter at least half of their profits from state taxes, according to Matthew Gardner, executive director at the Institute on Taxation and Economic Policy and a coauthor of the report.

The study was released yesterday by the institute, a Washington nonprofit that advocates on behalf of consumers in tax matters, and the Boston-based Massachusetts Public Interest Research Group, also a nonprofit advocacy group.

According to the study, EMC, the Hopkinton computer storage giant, paid $7 million in state taxes across the country, or a rate that averaged 0.3 percent, from 2008 through 2010. That’s well below the 8.25 percent corporate tax rate in Massachusetts and the average corporate tax rate for states of 6.2 percent, according to the study.

Raytheon, the Lexington defense contractor, had a three-year rate of 2.3 percent, according the report. Thermo Fisher Scientific Inc., a Waltham maker of analytical instruments and lab equipment, paid a rate of about 4.4 percent over the three years.

Raytheon spokesman Jon Kasle said the company “fulfills its tax obligations in compliance with tax laws and pays its taxes when they are due. This study is based on select pieces of data over a fixed period and is lacking in comprehensive analysis.’’

MassPIRG said the study relied on regulatory filings by the publicly traded companies. EMC and Thermo Fisher declined to comment.

Corporate tax rates are falling in many states, as local governments try to attract and keep businesses and jobs. The Massachusetts corporate tax rate is scheduled to drop to 8.0 percent on Jan. 1. It’s been coming down from 9.5 percent in 2009.

The personal tax rate in Massachusetts is 5.3 percent.

Bob Bliss, a spokesman for the Massachusetts Department of Revenue said the state took in $2.28 billion in corporate and business taxes in fiscal 2011. That marked a 5.1 percent increase from 2010.

(Original Post)

Marisa Lagos, Chronicle Staff Writer

Thursday, December 8, 2011

The state and federal governments are largely responsible for the widening gap between the rich and poor in the United States and should institute policy changes - including reforms to the tax code and more investment in education - to help reverse this 30-year trend, economists and researchers told state lawmakers Wednesday.

While many of the changes would need to take place at the federal level, professors from UC Berkeley and UC Davis said state leaders can play a role by instituting a more progressive tax system that asks wealthy individuals and successful corporations to pay more, and by investing in education and social services that help lower-income people succeed. Many of those public programs have been cut as California has faced budget deficits.

Speaking to the Assembly Committee on Accountability and Administrative Review, the academics laid out the staggering rise in income inequality that has occurred over the past three decades and said policymakers need to take more responsibility for the change.
Patterns transformed

"Over the past generation, the patterns of income growth have been radically transformed," said Paul Pierson, professor of political science at UC Berkeley, adding that the argument "that rising inequality is simply an economic reality ... too easily lets policymakers off the hook."

Pierson said that while the average person's tax rates haven't changed much in three decades, those for the "super rich" - those who take home more than $7 million a year after taxes - have, and in their favor.

"As much as one-third of the total gains of after-tax income for people making more than $7 million a year is the result of benefits they have received in the form of lower taxes," he said.
Rich get richer

Sylvia Allegretto, deputy chairwoman of UC Berkeley's Center on Wage and Employment Dynamics said that in 2008, the average annual pay for the top 1 percent of U.S. earners was well above $1 million after taxes - while the average pay for the 99 percent was just over $30,000 a year.

Meanwhile, wages have grown by nearly 40 percent for the top 10 percent of earners over the past three decades, while wages for the bottom 50 percent of earners have remained stagnant or fallen, she said.

Allegretto called this "you're on your own economics" and said it is "why we have workers who have paychecks along with food cards; it's why we have a term called the working poor." She noted that the 400 richest people in the United States, as calculated by Forbes magazine, hold about the same amount of wealth as the bottom 50 percent.

And Ann Stevens, director of UC Davis' Center for Poverty Research, sought to debunk the notion that economic inequality in the United States makes it more productive. She said that outside this country, there is no relationship between gross national product and inequality levels.

"At the current levels, it's simply not possible for a large fraction of U.S. earners to support themselves and their families, even if everything goes right," and they can work full time, she said.

All of the speakers endorsed more investment in all levels of education and programs that help lower-income people, as well as changes to the tax code. Specifically, Allegretto called for a state tax system that would create more brackets for those at higher income levels and lower taxes for those earning less.

"The burden cannot all be on the wealthy, but that's where we must start, given how well they have done," she said. "If we can level the playing field for workers, we may see a reversal of this trend."

The hearing came as the nonpartisan Institute on Taxation and Economic Policy released a study showing that 68 of the 265 most profitable Fortune 500 companies paid no state income taxes in at least one of the last three years; 20 of those companies paid no state taxes at all from 2008 to 2010, the report said.

(Original Post)

By Linda B. Blackford — lblackford@herald-leader.com

Posted: 12:00am on Dec 8, 2011; Modified: 6:27am on Dec 8, 2011

The Louisville-based parent of such companies as Kentucky Fried Chicken and Taco Bell paid no net corporate income taxes to states over the past three years, even as it generated more than a billion dollars in profits for shareholders, according to a new report.

Yum Brands is one of 68 companies nationwide that paid no state corporate income tax in at least one of the past three years, according to "Corporate Tax Dodging in the Fifty States, 2008-2010" a report released Wednesday by economic justice advocacy groups.

Twenty of those companies averaged a tax rate of zero or less during the 2008-10 period, including Yum Brands, according to the report by the Institute on Taxation and Economic Policy and Citizens for Tax Justice.

"The report's findings are troubling," said Jason Bailey, director of the Kentucky Center for Economic Policy, which also helped produce the report. "At a time of record corporate profits, many large corporations are avoiding paying their fair share for the public services from which they benefit. By deepening Kentucky's budget woes, corporate tax avoidance directly harms our ability to provide quality education, improve health and build a foundation for a strong economy."

Yum Brands officials did not return calls seeking comment on Wednesday. According to the report, Yum paid a state income tax rate of negative 2 percent in 2008, 0.3 percent in 2009 and 0.9 percent in 2010, for a three year rate of negative 0.4 percent.

Bailey said state corporate income taxes are a small percentage of a company's costs, but are very important to Kentucky's budget. Last fiscal year, about $300 million of the state's $8.76 billion in General Fund receipts came from corporate income taxes.

The report also showed that three other Fortune 500 companies in Kentucky — Ashland, Humana and Kindred Healthcare — paid a three-year state income tax rate of less than 4 percent.

The national average for a state corporate tax rate is 6.2 percent, according to the report. Of the 265 Fortune 500 companies studied in the report, the average state corporate income tax rate paid was 3 percent.

Nationally, the reasons for declining state corporate tax rates are varied and complex, including lower federal tax rates, economic development incentives that grant tax breaks, and the ability of multi-state corporations to legally shift profits from one state to another.

The advocacy groups examined filings with the U.S. Securities and Exchange Commission to ascertain tax rates, although it could not discern exactly what each corporation did to lower its tax rate.

Bailey said there are several things Kentucky's legislature could do to increase its corporate income tax revenue, including:

¦ Require combined reporting, under which a parent company and its subsidiaries are treated as a single corporation for state tax purposes. Combined reporting eliminates most of the advantage of shifting profits into Delaware, Nevada and other low- or no-tax states. Twenty-three states have put in place combined reporting, and Kentucky could gain $27 million to $54 million in additional revenue each year if it implemented combined reporting, according to a Legislative Research Commission analysis.

¦ Uncouple Kentucky's tax code from a federal tax loophole that provides a tax break for business activities in the United States. Kentucky partially allows the deduction for state taxes despite the fact that it provides no incentive for business investment or location in Kentucky as opposed to another state.

¦ Enact a throwback rule, which prevents taxable income of multi-state corporations from falling between the cracks by assigning income that is not taxable in any state to the home state where the goods are produced. Twenty-five other states have such a rule.

¦ Create a provision for corporate tax incentive programs that would require a periodic review of their effectiveness by a legislative committee. The programs would expire unless renewed by the legislature.

In Kentucky, the state will grant $292 million in corporate income tax breaks during 2012, according to the Office of the State Budget Director, but the long-term effectiveness of many of those tax exemptions has never been studied. By 2014, the cost is expected to increase to $310 million.

However, any proposed changes to Kentucky's tax policy face an uphill battle in Frankfort. Gov. Steve Beshear has said repeatedly that he does not support making major changes to Kentucky's tax code during a down economy.

Senate President David Williams, R-Burkesville, said during his recent gubernatorial race with Beshear that he favored eliminating the corporate income tax altogether and shifting to more dependence on the sales tax.

Rep. Jim Wayne, D-Louisville, files a bill every year that would overhaul the state tax code by lowering personal income taxes and taxing more services for the first time.

"It's a serious concern," Wayne said of Wednesday's report. "These companies need to pull their weight, otherwise it's not fair to the citizens of this state. We've given them many incentives. All corporations should pay their fair share."

(Original Post)

By Cathy Mckitrick

The Salt Lake Tribune

A new study takes aim at tax-dodging corporations, revealing that between 2008 and 2010, 68 Fortune 500 companies managed to avoid paying any state income tax for one or more of those three years.

The nonprofit Institute on Taxation and Economic Policy (ITEP) was joined by the advocacy organization Citizens for Tax Justice (CTJ) in releasing the 32-page report Wednesday, “Corporate Tax Dodging in the Fifty States, 2008-2010.”

In its examination of 265 profitable Fortune 500 corporations, the study concluded that states collectively missed out on $42.7 billion in tax revenues during the three-period between 2008 and 2010.

Voices for Utah Children, an advocacy group, reviewed the study and concluded that dozens of the companies operating in Utah paid out less than 1 percent in income tax during those years — well below the state’s statutory rate of 5 percent — while making millions of dollars in profits.

Allison Rowland, Voices for Utah Children research and budget director, said such actions directly impact the state’s future.

“When big corporations don’t pay state income taxes, our public schools have less money,” Rowland said in a statement, adding that Utahns who work for these Fortune 500 companies might be surprised to discover they pay state income tax at a higher rate than their corporate employers.

Rowland said the study can’t measure whether companies paid income tax in Utah since they are not required to disclose that information.

“Still, it makes clear just how many of them paid little or no state income tax on balance,” Rowland said.

While Wells Fargo made $49.7 billion in profits over the three-year period, the bank paid only 0.7 percent in state income tax. But the study also points out that some corporations appeared to pull their own weight — JP Morgan Chase & Co. earned $32.7 billion in profits while paying 9.1 percent in state income tax, while Whole Foods Market earned $834 million and paid out 10.3 percent in state income tax.

The ITEP study ignores a fundamental fact, said Royce Van Tassell, vice-president of the Utah Taxpayers Association.

“Corporate income is also taxed a second time as individual income when it gets distributed to shareholders,” Van Tassell said. “To say that corporations aren’t paying their fair share is really an anomaly — those taxes are paid for by workers, shareholders and consumers.”

Van Tassell advocates trimming corporate tax wherever possible in order to attract business investment into Utah.

But Doug Macdonald, former chief economist for the State Tax Commission and current chief economist and president of Econowest Associates, Inc. said cutting corporate taxes would further undermine Utah’s public school funding.

“I think they made a correct conclusion that many corporations don’t pay a fair share of taxes to the state, based on all the advantages they have doing business in the state,” Macdonald said.

No one can make the case that Utah needs less tax money going to schools, he added.

Utah ranks last in the nation in terms of per-pupil spending and tax policies approved in 2010 are poised to further erode that status as they phase in over time, according to data Macdonald compiled for Utahns for Public Schools.

“No one would fault corporations for minimizing their tax,” Macdonald said. “But the extent they go to is sort of repugnant to the individual person who can’t set up a corporation in another state or country to limit their own tax liability.”

(Original Post)

A comprehensive study on corporate tax avoidance finds that Louisville-based Yum Brands paid no net corporate income taxes to states over the past three years despite colossal profits over $1 billion.

The report was compiled by the Institute on Taxation and Economic Policy and Citizens for Tax Justice and lists 68 companies that paid no state corporate income tax. It show Yum Brands, which is the parent company of fast food giants Kentucky Fried Chicken and Taco Bill, had a tax rate of negative 2 percent in 2008, 0.3 percent in 2009 and 0.9 percent in 2010.

“Our report shows these corporations raked in a combined $1.33 trillion in profits in the last three years, and far too many have managed to shelter half or more of their profits from state taxes. They’re so busy avoiding taxes, it’s no wonder they’re not creating any new jobs,” Matthew Gardner, Executive Director at the Institute on Taxation and Economic Policy told the Sacramento Bee.

Other Fortunate 500 companies in Kentucky, including Louisville-based Humana Inc. and Kindred Healthcare, paid a three-year tax rate of less than four percent. The state budget receives around $300 million from corporate income taxes.

(Original Post)

(Original Post)

With states facing unprecedented budget crises – several Republican Governors are targeting their own unionized workers to squeeze as much money as they can out of working people.  But according to a new study from Citizens for Tax Justice – unionized government workers aren’t the reason behind state budget deficits – corporate tax dodgers are the real problem.  Between 2008 and 2010, 68 major corporations avoided paying ANY state taxes – despite the fact that these corporations raked in a combined 1.3 trillion bucks.  Altogether – the corporate tax dodgers cost states over $42 billion in much-needed revenue - enough to pay the salaries of over a million government workers at or above the US median wage.  Since Reagan was elected in 1980 – corporate taxes as a share of state revenue has been cut nearly in half.  So don’t believe the spin that unions have anything to do with state budget deficits.  There’s a real simple way for states to get back on track without screwing over teachers, firefighters, and cops – and that’s by simply making corporations pay their fair share of taxes again.

(Original Post)

(2011-12-07)

OKLAHOMA CITY, OK (kwgs) - A comprehensive new study finds that many consistently profitable companies are paying little to no corporate income taxes on those profits. Out of 265 Fortune 500 companies examined, 68 managed to pay no state income tax in at least one out of the last three years, despite making almost $117 billion in pretax profits in those no-tax years.

"Our report shows these 265 corporations raked in a combined $1.33 trillion in profits in the last three years, and far too many have managed to shelter half or more of their profits from state taxes," said Matthew Gardner, Executive Director at the Institute on Taxation and Economic Policy and the report's co-author.

These are among the findings in "Corporate Tax Dodging In the Fifty States, 2008-2010," released today by the Institute on Taxation and Economic Policy (ITEP) and Citizens for Tax Justice (CTJ), in conjunction with the Oklahoma Policy Institute (OK Policy). The report finds that 20 companies, including Oklahoma natural gas giant Chesapeake Energy, averaged a tax rate of zero or less during the 2008-2010 period.

"These findings are another example of a tax base that is increasingly full of holes," said OK Policy Director David Blatt. "These loopholes create distortions in the economy, since large, multi-state corporations have more resources to pursue tax avoidance strategies and gain an advantage over small business."

Gardner identified three chief causes for why state corporate tax revenues have steadily declined for two decades. First, state lawmakers continue to enact tax subsidies requested by corporations, most of which don't produce the promised economic results. Second, federal tax breaks enacted in the past decade further reduce state corporate income tax revenues since states generally accept corporations' federal tax numbers.

Third, said Gardner, "and most insidious, is that multi-state corporations themselves devote their money and legal firepower to coming up with tax avoidance schemes."

Of the Oklahoma-based corporations examined in the report, Chesapeake Energy paid an effective tax rate of negative 2.1 percent from 2008-2010, Devon Energy paid 0.6 percent, Williams paid 1.0 percent, and OneOK paid 1.1 percent. Oklahoma s corporate income tax rate is 6 percent.

It is not clear exactly how much Oklahoma might be losing due to tax avoidance strategies by both Oklahoma-based and out-of-state corporations. All figures in the report are aggregate for taxes paid to all U.S. states by each corporation, and it is not possible from available data to determine specific tax amounts paid by corporations to individual states.

The report makes three recommendations for states to help prevent corporate tax avoidance:

1) Combined reporting, which effectively treats a parent company and its subsidiaries as a single corporation for state tax purposes. It eliminates most of the advantage of shifting profits into Delaware, Nevada, and other tax haven states.

2) Decouple from federal tax loopholes, such as bonus depreciation, and other provisions which reduce the amount of taxable income corporations have to claim in their state tax filings. (Oklahoma already does this in most cases.)

3) Increase disclosure, transparency and accountability. Corporations should be required to publicly report their in-state profits, as well as any subsidies or loopholes they are exploiting each year.

"Combined reporting has already been implemented in a majority of states with corporate income taxes, including Kansas and Texas," said Blatt. "At a time when we are experiencing serious budget shortfalls, allowing these tax havens to continue is a disservice to all Oklahoma taxpayers."

(Original Post)

By Kyle Kennedy

THE LEDGER

Published: Wednesday, December 7, 2011 at 11:13 p.m.
Last Modified: Wednesday, December 7, 2011 at 11:13 p.m.

LAKELAND | A report says Publix Super Markets Inc. and seven other large Florida-based companies are among 265 "consistently profitable" firms that underpay corporate taxes owed to states.
Facts

Three think tanks, including the Tallahassee-based Florida Center for Fiscal and Economic Policy and two Washington, D.C. organizations, made the claims Wednesday. The report covers three years through 2010 and is based on corporations' annual reports.

The document's authors say they were not able to determine specific tax amounts paid by corporations to individual states. But they note the average state corporate tax is 6.2 percent and each Florida company cited paid less than 4 percent. Florida's rate is 5.5 percent.

Lakeland-based Publix paid $215 million in taxes on $5.5 billion in profits during the 2008-2010 period, for an average tax rate of 3.9 percent, the report states.

Publix spokeswoman Maria Brous said the company's tax rate reflects special deductions allowed by the government to encourage investment growth and domestic manufacturing. She also said Publix receives special deductions for donating food to organizations that support the needy and the elderly.

"So we are doing many things the state is encouraging and getting a deduction for it, just like you get when you personally make a charitable contribution or invest in a home," Brous told The Ledger.

Matt Gardner is the executive director of the Washington, D.C.-based Institute on Taxation and Economic Policy, which helped produce the report. He said Publix and other firms cited in the document appear to have valid reasons for paying lower tax rates, but argues whether lawmakers should allow that to happen.

"The underlying problem is that state governments and the federal government have enacted a huge variety of often conflicting and ineffective tax breaks that reward a lot of different companies for doing a lot of different things," Gardner said. "There are troubling questions about the overall impact of these tax breaks collectively on state tax systems."

The 265 Fortune 500 companies cited in the report cost states nearly $43 billion in lost revenues from 2008 through 2010, Gardner said. Collectively, the firms made $1.3 trillion in profits during the same period.

"That's really a big hole in state budgets … at a time when state governments nationwide and especially in Florida are facing difficult questions about how to balance budgets, whether it's through damaging spending cuts or tax increases," Gardner said.

In addition to Publix, the Florida companies listed in the report include NextEra Energy Inc., the parent company of Florida Power & Light Co.; Ryder System, Tech Data, CSX, Harris Corp., Health Management Associates and Darden Restaurants.

(Original Post)

By Travis Waldron on Dec 7, 2011 at 6:30 pm

DuPont would rather sponsor race cars than pay taxes

ThinkProgress has documented the repeated tax dodging of large corporations, some of which, like GE, have gone entire years without paying taxes despite hauling in massive profits. Now, that phenomenon has spread to the states, where many corporations have largely avoided paying state corporate income taxes despite growing profits. Some companies, like DuPont, avoided state taxes altogether, paying nothing from 2008 to 2010 even as its profits piled up.

But DuPont wasn’t alone. According to a study from Citizens for Tax Justice and the Institute on Taxation and Economic Policy, 68 corporations avoided state taxes entirely for at least one year from 2008 to 2010, costing state governments at least $42.7 billion, as the New York Times reports:

    To gauge how much Fortune 500 companies are paying in corporate income taxes, the study looked at the 265 of them that are both profitable and disclose their state tax payments. It found that 68 reported paying no state corporate taxes in at least one year between 2008 and 2010. All together, the study found that the companies reported $1.33 trillion in domestic profits from 2008 to 2010, but paid states only about half of what they would have if they had paid at the average corporate income tax rate of all states — reducing their state taxes by some $42.7 billion.

As the Times notes, the share of state revenues coming from corporate taxes has steadily declined since 1980, from about 10 percent then to less than 6 percent now. And despite Republican rhetoric calling for lower corporate taxes on the national level, America’s rate there remains low as well. Corporations continue to sit on huge amounts of cash without investing in job creation, but GOP politicians and corporate leaders have called for even larger tax giveaways.

Meanwhile, the lost tax revenue would have gone a long way toward plugging budget holes that were instead filled by cutting education, social services, and programs that helped states’ most vulnerable and needy residents.

(Original Post)

We already knew U.S. companies weren't paying enough federal taxes. But the same is also true at the state level

By Andrew Leonard

Why do those mean people at the Citizens for Tax Justice and the Institute on Taxation and Economic Policy keep picking on American corporations? Just one month ago, they released a damning report pointing out how hundreds of the bluest of American blue-chip corporations were flat-out deadbeats when it came to paying their federal income taxes. But that wasn’t enough. Now they’re piling on with even more nasty numbers — a breakdown of how many of those same Fortune 500 companies are also slipping out from under their state tax liability.

Bottom line: The average statutory corporate tax rate is 6.2 percent. But between 2008 and 2010, the 265 companies analyzed in the report “paid state income taxes equal to only 3.1 percent.” If they had paid the full rate, states would have collected another $82.6 billion in revenues, money sorely needed to pay Medicaid bills and keep parks open and employ teachers and firefighters.

We can’t repeat this enough: When you hear someone say that American corporations suffer from high taxes, take a moment to point out that, as far as taxes are concerned, it’s never been better than right now to be an American corporation.

    As recently as 1986, state corporate income taxes equaled 0.5 percent of nationwide Gross State Product (a measure of nationwide economic activity). But in fiscal year2010, state and local corporate income taxes were just 0.28 percent of nationwide GSP, equaling the low-water mark set in 2002. For the three years between fiscal 2009 and 2011, in fact, state corporate income taxes were at their lowest sustained level, as a share of the U.S. economy, since World War Two.

The report cites three major reasons to explain the ongoing decline in state corporate income tax revenue — “the trickledown impact of federal corporate tax cuts, ill-advised tax ‘incentives’ intentionally enacted by state lawmakers, and unintended tax shelters created by companies armed with creative accounting staffs.” The report also proposes a sheaf of well-meaning, sensible policy responses and strategies for reversing the trend. But ultimately, the proposed fixes all run head on into exactly the same political reality that any attempt to rationalize the federal income tax debacle faces: at the congressional level, politicians are still attempting to reduce corporate tax liabilities.

    Earlier this year, the House Judiciary Committee approved H.R. 1439, the so-called “Business Activity Tax Simplification Act” (BATSA), which would make it substantially more difficult for states to effectively tax the income earned by corporations from activities within their borders.

    The bill’s sponsors — and the corporate lobbyists pushing this plan — say that the goal of the bill is to limit state and local governments to taxing only those businesses with a “physical presence” in a state.

Of course, as the authors point out, the “physical presence” standard makes no sense in the Internet age. Even worse, any corporation with accountants who know what they are doing can easily structure subsidiaries to carry out physical operations in such a fashion as to escape local taxes.

Which leads us to one final inescapable conclusion. Today, a not insignificant amount of corporate creativity and innovation is channeled directly into the task of avoiding taxes. Our patchwork system of federal and state incentives and tax breaks creates fertile ground for game-playing. In a simpler world, you would have to think that energy could be directed to more productive uses.

(Original Post)

By MICHAEL COOPER
Published: December 7, 2011

As states have struggled to balance their budgets by cutting services, laying off workers and raising taxes, a study to be released on Wednesday suggests that many profitable Fortune 500 companies have not been paying as much in state corporate income taxes as the average levied on American companies, with some big firms paying none at all in recent years.

A few companies, including DuPont, reported paying no state corporate income taxes from 2008 to 2010 even as they reported profits, according to the study, which was conducted by Citizens for Tax Justice and the Institute on Taxation and Economic Policy, nonprofit research organizations in Washington that advocate a more progressive tax code. (A spokeswoman for DuPont said that she had not seen the study, but that “DuPont complies with all tax laws and regulations” wherever it operates.)

This year, there has been a great deal of discussion about whether corporations are paying their fair share of federal taxes. But the issue resonates at the state level as well, where corporate taxes have long been a shrinking share of state revenues. While corporate income taxes made up 9.7 percent of state revenues in 1980, according to the Nelson A. Rockefeller Institute of Government, they now make up only an estimated 5.7 percent.

To gauge how much Fortune 500 companies are paying in corporate income taxes, the study looked at the 265 of them that are both profitable and disclose their state tax payments. It found that 68 reported paying no state corporate taxes in at least one year between 2008 and 2010. All together, the study found that the companies reported $1.33 trillion in domestic profits from 2008 to 2010, but paid states only about half of what they would have if they had paid at the average corporate income tax rate of all states — reducing their state taxes by some $42.7 billion.

Matthew Gardner, the executive director of the Institute on Taxation and Economy Policy, said that state corporate-tax collections have dwindled for several reasons. Many states calculate their taxes based on federal corporate taxes, so some recent federal corporate tax breaks have lowered their collections. Other states have granted their own tax breaks to try to promote economic development, or to lure companies from other states. Companies, meanwhile, have grown adept at reducing taxes and finding tax shelters.

“The math is different at the state level than it is at the federal level,” Mr. Gardner said in an interview. “State lawmakers don’t have the luxury of cutting taxes and not worrying how to pay for it — they’ve got balanced budget requirements, which mean, inexorably, that if you cut a tax you have to pay for it either by hiking another tax or by cutting spending.”

Mr. Gardner said one limit of the study was that it showed only how much companies paid in total state taxes, not what they paid in each state. He said that for state officials to judge whether their tax codes are effective and fair, they should analyze what big companies are paying.

(Original Post)

By Andrew Zajac - Dec 7, 2011 12:29 AM ET

Sixty-eight large U.S. corporations paid no state income tax in at least one of the past three years and 20 had an average tax rate of zero or less in that period, according to a report by the Institute on Taxation and Economic Policy.

The Washington-based research group, backed by labor unions, found that three companies, Washington-based Pepco Holdings Inc. (POM), American Electric Power Co. (AEP) of Columbus, Ohio, and DuPont Co. (DD) of Wilmington, Delaware, paid no state income tax in each year between 2008 and 2010.

The study examined 265 companies in the Fortune 500 that were profitable in all three years and reported enough information to evaluate state income tax payments.

It found that those companies paid state income taxes equal to 3 percent of their U.S. profits, about half of the average statutory state tax rate, according to Matthew Gardner, executive director of the institute and co-author of the report.

The reduced rate of corporate state income tax payments translates into $42.7 billion in forgone revenue to those states in the past three years, the report found.

“Our report should be understood to show that state income taxes are not raising the revenue they were designed for,” Gardner said.

Forty-four states, plus the District of Columbia, levy some form of state corporate income tax. Ohio, Nevada, South Dakota, Texas, Wyoming and Washington, don’t have the tax, Gardner said.
Falling Revenue

Gardner said state corporate income tax revenue has been falling for 20 years. He attributed the decline to increased state subsidies to companies and to federal tax breaks that reduce the amount of taxable revenue. Companies also devote “money and legal firepower to coming up with tax-avoidance schemes,” he said.

States have contributed to the decline by shifting corporate taxation from property and payroll to sales, which generally yields lower taxes, said Joe Huddleston, executive director of the Washington-based Multistate Tax Commission. The organization of state governments administers tax laws for multistate businesses.

The three companies that, according to the report, avoided state income taxes were among 30 corporations listed as paying no federal income tax in the same period in a study last month by Citizens for Tax Justice, the institute’s sister organization.

Pat Hemlepp, a spokesman for American Electric Power, said the findings in both reports are skewed because the period occurred during an economic downturn when the company participated in federal stimulus programs to create jobs. Those programs benefited the company’s state and federal tax position, he said.
‘Villainizing Companies’

“There was bonus depreciation and other programs that allowed for deferral of taxes,” Hemlepp said in a phone interview. “All a report like this is doing is villainizing companies for following the directives of Congress and the administration.”

From 2005-2007, the three years before the period covered by the study, AEP paid $1.3 billion in federal taxes and $87 million in state taxes, he said. AEP’s tax payments will begin to revert to similar levels when the effects of stimulus programs wind down in 2012, Hemlepp said.

Pepco also cited the effects of stimulus programs in a statement on its tax payments.

The power company made about $2 billion in capital investments subject to tax benefits including bonus depreciation and other deductions, chief financial officer Anthony Kamerick said in a statement.

The accelerated deductions, along with “significant cash contributions the company made to the employee pension retirement plan” were the main reasons Pepco didn’t face a tax liability in that period, according to the statement.

DuPont spokeswoman Tara Stewart declined to address the conclusions of either report.

“DuPont complies with all tax laws and regulations in every jurisdiction in which it operates,” she said in an email.

To contact the reporter on this story: Andrew Zajac in Washington at azajac@bloomberg.net

To contact the editor responsible for this story: Mark Silva at Msilva34@bloomberg.net

(Original Post)

by Chris Lehman

December 6, 2011

Dozens of Fortune 500 companies paid no net state income taxes over the past three years, including one in the Pacific Northwest. That's one of the findings of a report issued Wednesday by a liberal think tank.

The report examined federal Securities and Exchange Commission filings from the more than half of Fortune 500 companies that reported profits over the past three years. Those filings show how much each company paid in state income taxes nationwide. The results varied widely, even among companies in the same industry. Juan Carlos Ordonez is with the watchdog group Oregon Center for Public Policy. He says the findings demonstrate how little information is available about how tax loopholes are used.

"Ultimately we don't know exactly how it is that some corporations end up paying nothing in some years, even as they report big profits to their shareholders," says Ordonez.

The report shows of the Fortune 500 companies headquartered in Oregon and Washington, only Bellevue-based truck manufacturer PACCAR paid no net state income taxes despite reporting a profit. The study comes from Citizens for Tax Justice and the Institute on Taxation and Economic Policy.

(Original Post)

WASHINGTON | Wed Dec 7, 2011 4:09pm EST

(Reuters) - Many brand-name U.S. companies are using deductions, credits and other means to shave their state tax rates below zero percent, a study by a left-leaning think tank released on Wednesday found.

Dupont and Intel Corp. are among the Fortune 500 companies that paid no net state income tax between 2008 and 2010, according to the Institute for Taxation and Economic Policy.

The study of 265 corporations that publicly disclose their state and local income taxes in financial reports found they paid state taxes, on average, of 3 percent on U.S. profits over the three year period.

The statutory average state corporate tax rate tops 6 percent.

Sixty-eight of the companies reviewed paid no state taxes in at least one of the years studied, the report found.

"Far too many have managed to shelter half or more of their profits from state taxes," said Matthew Gardner, executive director of the group, which advocates eliminating many corporate tax breaks.

The group attributed the low average rates to trends among states to trim taxes paid in several ways, from new methods of calculating tax, to breaks in the name of luring business.

"It is fair to say that a lot of it is legal activity," Gardner said. "We don't know for sure the balance between the various causes of tax reduction."

A Dupont spokeswoman said the chemicals group "complies with all tax laws and regulations in every jurisdiction in which it operates."

A spokesman for Intel was not available for comment.

States are still recovering from the 2008 financial meltdown, when many legislatures slashed spending and temporarily raised taxes.

But a tide of conservative governors took over in 2010, though, and are pushing for big corporate tax breaks.

Major U.S. companies often gripe about the top statutory corporate rate on the federal level, which at 35 percent is among the highest in the world.

At the same time, companies pay vastly differing rates - depending on whether their industry enjoys big deductions and credits.

(Original Post)

TALLAHASSEE, Fla. (AP) -- A report says eight large Florida-based companies are among 265 firms underpaying corporate taxes owed to states.

Three liberal think tanks, including the Tallahassee-based Florida Center for Fiscal and Economic Policy and two Washington, D.C. organizations made the claims Wednesday. The report covers three years through 2010 and is based on corporations' annual reports.

They don't break down how much is paid to each state. But the report notes the average state corporate tax was 6.2 percent and each company cited paid less than 4 percent. Florida's rate is 5.5 percent.

The Florida companies listed include NextEra Energy Inc., parent company of Florida Power & Light Co, Publix Super Markets and Ryder System.

The others are Tech Data, CSX, Harris Corp., Health Management Associates and Darden Restaurants.

(Original Post)

MIKE IVEY | The Capital Times | mivey@madison.com | @BizBeatIvey | Posted: Wednesday, December 7, 2011 12:30 pm

A new report is out showing -- once again -- that the largest and most profitable U.S. corporations manage to skirt paying state and local income taxes.

The Washington-based Institute on Taxation and Economic Policy in its report profiles 265 of the most profitable Fortune 500 corporations and finds 68 companies -- including Milwaukee-based Rockwell Automation -- paid no state corporate income tax in at least one of the last three years.

Twenty of these corporations averaged a tax rate of zero or less during the 2008-2010 period, the report found.

Wisconsin companies named in the report include include Rockwell Automation, Harley-Davidson and Kohl's.

Rockwell, the former Allen Bradley Corp., reported annual profits each year from 2008 to 2010, netting $670 million, but paid negative taxes, according to WISPIRG. How did it manage that? With state tax rebates totaling $17 million.

The problem, says Bruce Speight, the director of the Wisconsin Public Interest Research Group (WISPIRG) is that other taxpayers have to make up the difference.

 "Individual taxpayers and small businesses in Wisconsin end up having to pick up the tab when these corporations avoid paying their taxes," says Speight in a statement.

Biz Beat contacted Rockwell for comment but hasn't heard back yet.

WISPIRG's own study last year of offshore tax havens found that households in Wisconsin pay on average $372 in additional federal taxes to make up for that revenue lost.

The big question on corporate taxation, of course,is what to do about it. If regulators clamp down or the laws get changed, companies will just pass the higher taxes along to consumers.

No wonder so many small businesses owners feel like the deck is stacked against them -- especially if they can't afford to hire an expensive accountant or tax lawyer.

Here is the New York Times story on the report.

(Original Post)

December 7, 2011

California's major corporations have rung up hundreds of billions of dollars in profits in recent years, but have paid only a few percentage points of those profits in state income taxes, according to a new nationwide study by several liberal organizations.

The compilation of corporate profits and state taxes was conducted by the Institution on Taxation and Economic Policy and Citizens for Tax Justice and released in California by the California Public Interest Research Group.

It covered 265 of the Fortune 500 corporations that reported profits for three straight years, 2008-2010, including 33 based in California.

Nationwide, the 265 firms had a combined $1.33 trillion in profits during the three-year period but on average, paid just 3 percent of those earnings in state corporate income taxes.

The 33 California corporations' tax bills ranged from minus-1.5 percent (McKesson Corp.) to 8 percent (Apple). The California corporation with the largest profits during the period, Wells Fargo Bank at $49.7 billion, paid $344 million or 0.7 percent in state taxes. Second-place Intel Corp., with $23.3 billion in profits paid no state income taxes, the study found.

In dollar terms, Chevron Corp. had the highest state tax bill, paying $1.1 billion or 5.8 percent of its $18.6 billion in profits over the three years.

Although the sponsors of the corporate tax study call it "corporate tax dodging," they don't allege that the companies did anything illegal. Rather, they took advantage of various state writeoffs, many of which reflected federal tax law, to minimize their state tax bills.

"Thanks to their armies of accountants, paying taxes has become optional for some of the most profitable corporations in the world," said Pedro Morillas, CALPIRG's legislative director. "And that leaves small businesses and individual taxpayers to pick up the tab."

State corporate taxes in California run just under $10 billion a year and the Legislature's budget analyst says that even with economic recovery, they're unlikely to rebound quickly because "businesses will be more able to use new or previously earned state tax credits (such as research and development or enterprise zone credits) to reduce taxes owed."

(Original Post)

Posted by Jonathan Meador on Wed, Dec 7, 2011 at 12:44 PM

Memphis-based International Pulp and Paper paid no state income taxes in 2008 and 2010, according to data released today by the nonprofit Citizens for Tax Justice.

The data, included in the CTJ's “Corporate Tax Dodging in the Fifty States, 2008-2010" report, culled tax information from 265 Fortune 500 companies, of which 68 paid no income taxes in at least one year out of the last three. The report reveals that International Pulp and Paper — unarguably the world's biggest pulp and paper manufacturer and largest producer of disposable paper cups and plastic lids — netted $551 million in profits during the years it paid an effective -3.8 percent tax rate.

From the CTJ:

    “Our report shows these corporations raked in a combined $1.33 trillion in profits in the last three years, and far too many have managed to shelter half or more of their profits from state taxes,” said Matthew Gardner, Executive Director at the Institute on Taxation and Economic Policy and the report’s co-author. “They’re so busy avoiding taxes, it’s no wonder they’re not creating any new jobs.

    ...

    “Corporate Tax Dodging in the Fifty States, 2008-2010” concludes that these 265 corporations cost states $42.7 billion in lost revenues in the last three years, and Gardner identifies three chief causes for state corporate tax revenues steadily declining for two decades. First, state lawmakers continue to enact tax subsidies requested by corporations, most of which don’t produce the promised economic results. Second, federal tax breaks enacted in the past decade further reduce state corporate income tax revenues since states generally accept corporations’ federal tax numbers. Third, said Gardner, “and most insidious, is that multi-state corporations themselves devote their money and legal firepower to coming up with tax avoidance schemes.”

To put it in perspective, Tennesseans pay the highest sales taxes and the third-highest food taxes in the country, whereas one of its largest companies gets paid simply to exist. It's the kind of thing that just might make people take to the streets in protest...

(Original Post)

Dollar General Corp. and Community Health Systems are among Fortune 500 companies in Tennessee using loopholes to avoid paying their fair share of state corporate income taxes, according to a new report from two tax policy think tanks.

Nationwide, corporate tax avoidance by 265 corporations cost all states $42 billion in lost revenues in the past three years, The Institute on Taxation and Economic Policy and Citizens for Tax Justice concluded. The report is titled: “Corporate Tax Dodging in the Fifty States, 2008-2010.”

FedEx, International Paper, and AutoZone were among other Tennessee companies also mentioned as for having corporate tax rates of less than 3 percent overall from 2008 to 2010.

Tennessee’s corporate income tax rate is 6 percent, the think tanks said.

(Original Post)

Bonnie Kavoussi First Posted: 12/ 7/11 12:16 PM ET Updated: 12/ 7/11 12:16 PM ET

Large U.S. corporations are not only figuring out ways to avoid federal income taxes, but taxes at the state level too.

Of the country's most consistently profitable large companies, a full fourth of them -- 68 companies in total -- paid no state income tax at least once over the past three years, according to a study released on Wednesday by the left-leaning Citizens for Tax Justice. Moreover, twenty large consistently profitable U.S. companies paid an average state income tax of zero or less between 2008 and 2010, according to the study.

News of the tax-dodging comes at a time when states are imposing layoffs and slashing services to combat widening budget deficits. Overall, state-level revenue from corporate taxes has been plummeting for the past 20 years as tax-avoidance schemes have become more sophisticated, according to an interview with Gardner by Bloomberg News. Today, only six states do not levy income taxes, according to Bloomberg News.

"They're so busy avoiding taxes, it's no wonder they're not creating any new jobs," Matthew Gardner, executive director of the Institute on Taxation and Economic Policy and a co-author of the study, said in a statement. He added that large corporations "devote their money and legal firepower to coming up with tax avoidance schemes."

Companies that avoided paying state income taxes at least once in the past three years include Boeing, Goldman Sachs, Wells Fargo, General Electric, Yahoo, J.C. Penney, Hewlett-Packard, American Express, Merck, and Verizon, according to the study. And on average, the 265 companies surveyed paid taxes at roughly half of the official rate, costing states $42.7 billion in revenue over the past three years, the study found.

Many large U.S. corporations also have shifted their profits overseas in order to avoid federal taxes.

A study by Citizens for Tax Justice released in June found that 12 large U.S. corporations -- including General Electric and DuPont -- paid far less in federal corporate taxes than the official rate. A separate report by the Citizens for Tax Justice found thirty large U.S.-based multinational companies paid negative federal income taxes over the past three years, with Wells Fargo taking home the most in tax subsidies.

Google and Microsoft were excluded from the report because both report most of their profits as foreign. The IRS currently is investigating Google, which has been saving about $1 billion per year by shifting its profits overseas, for tax evasion.

U.S.-based multinational companies also have slashed jobs at home while hiring abroad, cutting 864,000 U.S. jobs between 1999 and 2009, while adding 2.87 million jobs elsewhere, according to the Commerce Department.

(Original Post)

Submitted by Robert Oak on Wed, 12/07/2011 - 13:02

We already know many large multinationals pay no Federal taxes, but did you know many businesses don't pay State taxes either? Citizens for Tax Justice has issued a new report, Corporate Tax Dodging in the 50 States, 2008-2010. The report shows, instead of creating jobs and products, corporations seem to be in the business of tax dodge.

corporate rates
State Corporate Tax Map Created By The Tax Foundation

    A comprehensive new study that profiles 265 consistently profitable Fortune 500 companies finds that 68 of them paid no state corporate income tax in at least one of the last three years and 20 of them averaged a tax rate of zero or less during the 2008-2010 period.

Pepsi is the worst offender, with a 3 year effective state tax rate of –13.2%. Yes, that means the States pay Pepsi, not the other way around. One must wonder how flavored sugar water could get so many tax breaks.

A huge surprise on who is paying taxes, JPMorgan Chase. Yes, I kid you not, a TBTF bank's 3 year effective state tax rate was 9.1%.

A federal contractor and outsourcer, Computer Sciences Corporation had the next biggest three year negative effective state tax rate, –9.5%. Yes, they operate a division in...drum roll please, Bangalore, although the good news is often DoD contracts require U.S. citizenship and a security clearance, a saving grace which preserves U.S. jobs...for now.

CTJ found corporations' taxes were once 0.5% of State Gross Product (the state equivalent of GDP) back in 1986. Now corporate taxes are only 0.28% of Gross State Product and the lowest contribution levels since World War II.
100 Percent Nowhere Income

The report goes through some tax avoidance tricks, incentives which corporations lobby state governments to avoid paying any taxes. In many cases, these same corporations get states to pay them. One such loophole is called the 100% nowhere tax. What corporations got is a tax on sales only in that state instead of business activity, property, payrolls in the state. All a corporation has to do to pay zero taxes is to have their production in that state and all actual sales, out of that state. Voilà, zero tax.

Corporations also shift profits around for tax purposes:

    Profit shifting among states is enabled by a provision of most states’ corporate tax laws that treats every individual corporation in a multi-corporate group (that is, the parent and potentially dozens or even hundreds of subsidiaries)as a separate corporation for tax purposes. This practice —known as “separate-entity taxation”—enables a number of tax avoidance techniques.

There is one tax shelter, referred to as the toys -r- us, where corporations dump all of their trademarks, copyrights, patents, logos into a separate holding company that is then incorporated in a tax haven jurisdiction. Then, that newly incorporated holding company charges royalties to the other companies' holdings to use their own logos and trademarks, copyrights and patents. What happens here is a massive tax write off, as a business expense, for charging yourself fees for using your own intellectual property. Pretty slick huh? Now you know why corporations move various patents, copyrights and trademarks into special purpose vehicles, incorporated in the Caymans, Delaware and so on. Tax Loophole extraordinaire.

The report goes on to make recommendations for states to close loopholes, but then mentions a bill in Congress, the Business Activity Tax Simplification Act, which makes the situation even worse. We already know corporations get incentives, subsidies to create jobs, take that state and local tax break, and offshore outsource the jobs instead.

In 2004, Congress passed a qualified production activities income deduction, supposedly to assist in a WTO ruled illegal export subsidy. Thing is, corporations are using this tax break, without creating actual jobs in the states. Why? Because congress didn't tie this tax break to jobs, a pattern we've seen over and over again. If States want corporations to create jobs and give incentives for them, they must tie the tax break to actual State residents, U.S. citizens, for the jobs. Doh.

Bottom line, corporations clearly spend millions, with divisions of lbbyists, CPAs and tax attorneys, to manipulate tax codes. One of the study authors, Matthew Gardner said this on his findings:

    Our report shows these 265 corporations raked in a combined $1.33 trillion in profits in the last three years, and far too many have managed to shelter half or more of their profits from state taxes. They’re so busy avoiding taxes, it’s no wonder they’re not creating any new jobs.

(Original Post)

Washington, D.C. (December 7, 2011)

By Michael Cohn, Accounting Today

Sixty-eight of the most consistently profitable Fortune 500 companies paid no state corporate income tax in at least one of the last three years, and 20 of the companies averaged a tax rate of zero or less from 2008-2010.
Like what you see? Click here to sign up for Accounting Today's daily newsletter to get the latest news and behind the scenes commentary you won't find anywhere else.

Nevertheless, the companies told shareholders they made nearly $117 billion in pre-tax U.S. profits during those no-tax years, and 16 of the companies had multiple no-tax years.

A new study from the advocacy group Citizens for Tax Justice and the Institute on Taxation and Economic Policy found that 265 of the most consistently profitable U.S. corporations cost states $42.7 billion over three years. If the 265 corporations had paid the 6.2 percent average state corporate tax rate on the $1.33 trillion in U.S. profits that they reported to their shareholders, they would have paid $82.6 billion in state corporate income taxes over the 2008-10 period. Instead, they paid only $39.9 billion.

Some companies, such as DuPont, Goodrich, International Paper and Intel, paid no net state income tax over the full three-year period. Among the 20 corporations who paid zero or less in state corporate income taxes over the three-year period were utility provider Pepco Holdings, pharmaceutical giant Baxter International, and fast food provider Yum Brands.

Of the 280 profitable Fortune 500 corporations included in an earlier study from the two groups last month on corporate tax avoidance at the federal level, 265 fully disclosed their state and local income tax payments (see 30 Major Corporations Avoided Federal Income Taxes). Using information from the companies’ annual reports, the report found that between 2008 and 2010, these 265 companies paid state income taxes equal to only 3.0 percent of their U.S. profits.

Since the average statutory state corporate tax rate is about 6.2 percent (weighted by gross state product), that means that over this period, about half of their profits escaped state taxes entirely.

“Our report shows these corporations raked in a combined $1.33 trillion in profits in the last three years, and far too many have managed to shelter half or more of their profits from state taxes,” said Matthew Gardner, executive director at the Institute on Taxation and Economic Policy and the report’s co-author. “They’re so busy avoiding taxes, it’s no wonder they’re not creating any new jobs.”

In 2009 alone, 32 companies paid no state income tax. Another 105 of the companies paid less than half the weighted-average statutory state corporate tax rate that year, meaning that fully one half of the companies in the sample paid less than half the average state tax rate.

(Original Post)

By Sandra Pedicini, Orlando Sentinel

4:54 p.m. EST, December 7, 2011

Three Central Florida companies were named in a national report released Wednesday that contends many corporations pay too little in state income tax.

Darden Restaurants, Publix and Harris Corp. are "paying substantially less than what the tax rate would suggest they should be paying," said Matthew Gardner, executive director of the Institute on Taxation and Economic Policy, a nonprofit research group. It co-authored the report with Citizens for Tax Justice, an advocacy group backed by unions.

Both organizations have pushed for cracking down on corporate tax breaks and loopholes. Both allow companies to shield much of their profit from taxes, according to the report, "Corporate Tax Dodging in the 50 States."

Nationwide, the average state corporate tax rate on company profits is 6.2 percent, and Florida's is 5.5 percent. The 265 companies listed paid an average of 3 percent of profits in state taxes over three years.

Orlando-based Darden and Lakeland-based Publix both paid an average of 3.9 percent from 2008 to 2010, the report said. Melbourne-based Harris paid an average of 2.8 percent.
HotDealsOrlando: Enter for chance to win $500 for holiday shopping

Darden reported $1.6 billion in profits over the past three years, the report said, while Publix earned $5.5 billion, and Harris had $2.2 billion.

In an email, Darden said, "We believe we pay our fair share of taxes, and any study that discounts that may not have the complete picture. The company said it has created more than 3,000 jobs in Florida and more than 20,000 nationwide since 2008.

Publix said it takes deductions just as people do and gets tax breaks for things such as investing in communities and manufacturing in the United States.

A Harris spokesman said in an e-mail the rate in the report does not take into consideration the company's international presence and tax rates for each region. Harris paid on average about 32 percent of its total income in federal, state and international income taxes, the company said.

Darden owns Olive Garden, Red Lobster and LongHorn Steakhouses among other dining chains. Publix has supermarkets around the Southeast, and Harris has operations in more than half a dozen states.

spedicini@tribune.com or 407-420-5240.

(Original Post)

WASHINGTON, Dec. 7, 2011 /PRNewswire via COMTEX/ -- The Institute on Taxation and Economic Policy and Citizens for Tax Justice Release "Corporate Tax Dodging in the Fifty States, 2008-2010"

A comprehensive new study that profiles 265 consistently profitable Fortune 500 companies finds that 68 of them paid no state corporate income tax in at least one of the last three years and 20 of them averaged a tax rate of zero or less during the 2008-2010 period. These are among the findings in "Corporate Tax Dodging in the Fifty States, 2008-2010" released today by the Institute on Taxation and Economic Policy (ITEP) and Citizens for Tax Justice (CTJ).

"Our report shows these corporations raked in a combined $1.33 trillion in profits in the last three years, and far too many have managed to shelter half or more of their profits from state taxes," said Matthew Gardner, Executive Director at the Institute on Taxation and Economic Policy and the report's co-author. "They're so busy avoiding taxes, it's no wonder they're not creating any new jobs."

Among the 20 corporations who paid zero or less in state corporate income taxes over the three year period are:

Utility provider Pepco Holdings (DC); pharmaceutical giant Baxter International (IL); chemical maker DuPont (DE); fast food behemoth Yum Brands (KY); high tech manufacturer Intel (CA). All 265 corporations, headquartered in 36 states, are listed in the report at www.ctj.org/corporatetaxdodgers50states .

"Corporate Tax Dodging in the Fifty States, 2008-2010" concludes that these 265 corporations cost states $42.7 billion in lost revenues in the last three years, and Gardner identifies three chief causes for state corporate tax revenues steadily declining for two decades. First, state lawmakers continue to enact tax subsidies requested by corporations, most of which don't produce the promised economic results. Second, federal tax breaks enacted in the past decade further reduce state corporate income tax revenues since states generally accept corporations' federal tax numbers. Third, said Gardner, "and most insidious, is that multi-state corporations themselves devote their money and legal firepower to coming up with tax avoidance schemes."

The report describes profit shifting and other common corporate tax avoidance strategies and outlines several reforms state lawmakers can immediately implement to ensure profitable corporations doing business in each state pay closer to the statutory rate, including:

Implement combined reporting, which effectively treats a parent company and its subsidiaries as a single corporation for state tax purposes. It eliminates most of the advantage of shifting profits into Delaware, Nevada and other low- or no-tax states.

Decouple from federal tax loopholes, such as bonus depreciation, and other provisions which reduce the amount of taxable income corporations have to claim in their state tax filings.

Increase disclosure, transparency and accountability. Corporations should be required to publicly report their in-state profits, as well as any subsidies or loopholes they are exploiting each year.

Corporate Tax Dodging in the Fifty States, 2008-2010" follows up on "Corporate Taxpayers and Corporate Tax Dodgers, 2008-2010" which was published in November by Citizens for Tax Justice (CTJ) and the Institute on Taxation and Economic Policy (ITEP). Because few states have transparency regarding business taxes, it is not possible to determine specific tax amounts paid by corporations to individual states; all figures in "Corporate Tax Dodging in the Fifty States, 2008-2010" are aggregate for taxes paid to all U.S. states by each corporation.

The newest study is online at www.ctj.org/corporatetaxdodgers50states .

Founded in 1980, the Institute on Taxation and Economic Policy (ITEP) is a 501 (c)(3) non-profit, non-partisan research organization, based in Washington, D.C., that focuses on federal and state tax policy. ITEP's mission is to inform policymakers and the public of the effects of current and proposed tax policies on tax fairness, government budgets, and sound economic policy ( www.itepnet.org ).

Citizens for Tax Justice (CTJ), founded in 1979, is a 501 (c)(4) public interest research and advocacy organization focusing on federal, state and local tax policies and their impact upon our nation ( www.ctj.org ).

SOURCE Citizens for Tax Justice

(Original Post)

By Travis Waldron on Dec 5, 2011 at 7:10 pm

As Democrats continue to push a renewal of the payroll tax cut included in last year’s deal to extend the Bush tax cuts, members of the Republican Party have reportedly grown concerned that if they do not go along with the proposal, they will lose their reputation as anti-tax zealots and get painted as defenders of the richest Americans. Arizona Sen. Jon Kyl (R), apparently, is not one of those Republicans.

Speaking on the Senate floor this afternoon, Kyl blasted the plan put forth today by Majority Leader Harry Reid (D-NV), which would partially pay for the extension by instituting a temporary surtax on Americans whose incomes top $1 million. Despite outlining his perceived problems with the plan, however, Kyl said he could be persuaded to vote for an extension — but only if Democrats agreed to again extend the 2003 Bush tax cuts for the wealthiest Americans:

    KYL: It was part of an overall agreement in which we said we will extend all of the existing tax rates — the so-called Bush tax cuts, that is the rates that have been in effect since 2001 and 2003, we would extend this temporary tax holiday from the payroll tax cut, we would extend all of those. And I supported that. That frankly was the right thing to do, to extend all of these existing rates. … Now if we can do that again, I’m all for it. I’ll support the extension of the payroll tax holiday.
    
The payroll tax cut extension as proposed by Democrats would ensure that, at a time when the middle- and working-classes are still inching toward recovery, the average household would pocket an extra $1,000 a year. Meanwhile, in Kyl’s home state of Arizona, the millionaires’ surtax used to pay for much of the extension would affect just 0.1 percent of all taxpayers — a whopping 3,173 people who bring home an average annual income of $3.5 million, according to a Citizens for Tax Justice analysis. And while proposals exist to pay for the extension, no such plan exists for the Bush tax cuts, despite a 10-year price tag topping $2.5 trillion and no meaningful job creation to show for the cost.

Kyl’s statement is a direct contradiction to comments he made just a year ago during debate about the Bush tax cuts. “My view, and I think most of the people in my party don’t believe that you should ever have to offset a tax cut,” Kyl told reporters in July 2010. Now that it is a Democratic tax cut on the table, however, Kyl not only opposes the Democrats’ attempts to offset the costs, he wants to ensure that the middle class doesn’t get a tax cut unless the wealthiest Americans — whose tax rates are already at historic lows — get one too.

(Original Post)

Jillian Berman 12/ 5/11 06:36 PM ET Updated: 12/ 5/11 06:36 PM ET

It's no secret that many multinationals have become particularly adept at exploiting tax loopholes. Nor is it a surprising that the U.S. federal deficit is widening as a result. What's not as publicized, however, is that developing nations are also feeling the heat.

Developing countries have lost hundreds of billions of dollars due multinational corporations' ability to both legally and illegally avoid taxes, and a lack of adequate monitoring by regulators, according to a recent report from the European Network On Debt and Development.

Between 2005 and 2007 in sub-Saharan African countries alone, nearly $27 billion was shifted illegally due to trade mispricing -- or when companies manipulate trade access borders for profit -- the report found. But multinational corporations are also using legal means to pay less in taxes, including setting up subsidiaries and administrative units in countries with near-zero tax rates and allocating the value of what the company creates to the most favorable region.

The report mirrors others indicating that many multinational corporations are getting increasingly skilled at avoiding taxes. Nearly 300 of America's most profitable corporations paid an average tax rate of 18.5 percent between 2008 and 2010, according to an October study from Citizens for Tax Justice. That's compared to the actual corporate tax rate of 35 percent, nearly double the rate actually paid.

The CTJ report also found that 30 highly-profitable companies paid a negative tax rate between 2008 and 2010, even though they took home a combined $160 billion in pre-tax profits.

Some corporations are pushing for more ways to make it easier for them to avoid taxes. Companies such as Apple and Google have hired more than 160 lobbyists to encourage Congress to reinstate a repatriation tax holiday, according to Bloomberg. The tax holiday on offshore profits would save the companies more than $1 trillion if passed.

But corporations already take advantage of a variety of tax loopholes. Some use the "active financing exception," which allows companies to avoid paying taxes on overseas profits if the company got those profits by "actively financing" a deal, according to The New York Times.

Companies also commonly take advantage of the "accelerated depreciation" rule, which allows them to write off investments faster than they wear off, according to The Washington Post. The companies then subtract the falling value of the investments from their taxable income.

(Original Post)

DAVE ZWEIFEL | Cap Times editor emeritus | Posted: Monday, December 5, 2011 4:00 am

To hear national politicians like the current crew of Republican presidential aspirants and local ones like Scott Walker and the brothers Fitzgerald tell it, corporations are being forced to pay so much in taxes that they can’t afford to hire workers.

Trouble is, this tall tale has been told so many times that people have come to actually believe it. How many times have you heard anti-government mouthpiece Grover Norquist complain that U.S. taxes on business are the highest in the world?

While the federal corporate tax rate is 35 percent, which, indeed, is high, there aren’t very many who actually pay it.

In fact, a new comprehensive study released in November reported that 280 of the biggest publicly traded American companies paid federal income tax bills equal to 18.5 percent of their profits during the past three years.

Like the most wealthy Americans, who Warren Buffet often points out wind up with tax bills of about 17 percent, the corporations are able to take advantage of tax code breaks that significantly lower their tax liability. Some are quite aggressive in uncovering ways to weasel out of paying taxes.

Citizens for Tax Justice studied the regulatory filings of the 280 firms to compute the actual taxes they paid. Using that information, the study found that one-fourth of the corporations owed less than 10 percent of profits in federal taxes while 30 of them had no tax liability over any of the three years. Another one-fourth actually wound up paying the 35 percent rate.

“Companies that are paying their fair share ought to demand that the tax-dodging companies pay their fair share, too,” said Robert S. McIntyre, the study’s author. “So should the public, which is subsidizing them in terms of increased federal debt.”

The organization conducted the study in response to corporate lobbyists’ claims that the 35 percent corporate rate needs to be lowered so that American companies can compete with foreign competitors. Citizens for Tax Justice insists that the taxes they pay now are actually lower than many of their overseas rivals.

As McIntyre pointed out, it’s the average U.S. citizen who winds up having to make up the difference. The loopholes and tax breaks are just one more way of shifting costs from the country’s most wealthy to the backs of the working people.

(Original Post)

By Bernie Becker - 12/01/11 10:53 AM ET

Advocates from all along the political spectrum called on lawmakers to enact a corporate tax holiday over the next month, saying election-year politics could hamstring the policy’s chances in 2012.

Douglas Holtz-Eakin, head of the conservative American Action Forum, and Andy Stern, a former top union official, said they believed a measure allowing corporations to repatriate offshore funds at a drastically reduced rate could be included in a broader year-end package.

Holtz-Eakin and Stern also sang the praises of the tax holiday from a policy standpoint, saying it was one of the few ways to insert needed funds into the economy that had bipartisan support.

“I don’t see any great value in waiting for next year,” said Holtz-Eakin, an economic adviser to Sen. John McCain’s (R-Ariz.) 2008 presidential campaign.

Still, it remains to be seen whether repatriation can find a vehicle for passage in December, as lawmakers already have the payroll tax cut, unemployment insurance, the Medicare doc fix and an appropriations omnibus on their plate.

Repatriation backers, who have put on a full-scale lobbying effort, had hoped the supercommittee would take up their issue. But the panel failed to craft at least a $1.2 trillion deficit-reduction plan.

Under bipartisan repatriation bills in both the House and the Senate, multinationals could find ways to temporarily bring offshore profits to the U.S. at as low a rate as 5.25 percent — an 85 percent reduction from the top corporate rate of 35 percent.

American corporations pay their full tax rate on profits made anywhere in the world, though they do get credits for taxes paid to foreign governments. According to some estimates, U.S. companies have more than $1 trillion abroad — money that corporations say they might repatriate more of if not for the high tax rate.

“There’s one simple and profound message here: We need the money in the United States. It’s doing no good overseas,” Stern, a former president of the Service Employees International Union, said Thursday.

In addition to Holtz-Eakin and Stern, Laura Tyson, a Clinton administration official, and the anti-tax activist Grover Norquist have backed the idea.

But the idea also has opponents from both sides of the political aisle, including the union-backed Citizens for Tax Justice and the conservative Heritage Foundation.

Critics have said a previous holiday, enacted in 2004, did not create jobs and that repatriated funds were instead used more for stock buybacks. The Joint Committee on Taxation has also projected that a second crack at a holiday could lose close to $80 billion over a decade.

“While Congress is working to address the projected long-term deficits, a repatriation holiday is a narrowly targeted tax break that is neither warranted nor affordable,” a coalition of liberal groups wrote to lawmakers in October.

The White House has also said it is unwilling to look at repatriation outside of the broader discussion over tax reform. Meanwhile, Rep. Dave Camp (R-Mich.), the chairman of the House Ways and Means Committee, has released a draft proposal that would move to permanently limit U.S. taxation of offshore profits that includes a repatriation provision.

But on Thursday, both Holtz-Eakin and Stern said that, while they back tax reform, they were skeptical an overhaul could get done in an election year.

Holtz-Eakin also said that, even if funds were used for stock buybacks, that money would eventually seep into the economy. And, he added, repatriation would cost less than a one-year extension of the payroll tax cut.

In short, Stern said, repatriation could be “a little bit of a holiday present” for American workers.