GE Tries to Change the Subject

February 29, 2012 02:06 PM | | Bookmark and Share

In response to CTJ’s recent finding that GE had an effective federal corporate income tax rate of two percent over ten years, GE’s press office issued a short statement designed to divert attention from its tax-avoiding ways. GE has nothing to say to contradict the figures we cite from its own annual reports.

Read the report.

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Quick Hits in State News: Sears Fires Workers Despite Tax Breaks, and More

  • Just last year Sears and other companies threatened to leave Illinois after the state’s corporate income tax rate increased. So two months ago, Illinois lawmakers awarded Sears a targeted tax credit to appease them. The company kept their headquarters in Chicago (not surprisingly), but announced last week they would be laying off 100 employees from their headquarters anyway.  
  • The Institute on Taxation and Economic Policy (ITEP) responds to Oklahoma Governor Mary Fallin’s misguided tax plan with an op-ed in The Oklahoman.  The Governor has said that her income tax repeal proposal is “pro-jobs” and a “game-changer,” but ITEP makes clear that Oklahomans should not expect their economy to improve if they join the no-income tax club.
  • Virginia just struck a deal with Amazon requiring the company to begin collecting sales taxes by September 1, 2013, but traditional brick and mortar retailers in the state don’t want to wait another eighteen months for a more even playing field.  The North Jersey Record opens its editorial of a potentially similar deal in the Garden State with the right question: “How much help from the state of New Jersey does a business with a 2011 profit of $631 million really need?”
  • Some legislators in Minnesota are proposing a hike in regressive cigarette taxes. Governor Mark Dayton’s various proposals to increase taxes on the best off Minnesotans are the better plan. 
  • An editorial in the Kansas City Star wisely points out that the “soak-the-poor approach to tax reform of Topeka today is counter-productive to getting people back to work.” The piece calls on lawmakers to “stop [their] mean spirited attack on the poor” and keep the state’s Earned Income Tax Credit
  • In an interview with CNN last week about his income tax cut plan, New Jersey Governor Chris Christie lashed out at Warren Buffett for his call for higher taxes on the rich saying the billioniare “should just write a check and shut up.”  To which Buffett replied, “It’s sort of a touching response to a $1.2 trillion deficit, isn’t it? That somehow the American people will all send in checks and take care of it?”

American Taxpayers Subsidize Monday Night Racing

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Romney: I Have Friends Who Own NASCAR Teams

The 2012 NASCAR season kicked off Monday with the Daytona 500. The much-celebrated start to the racing season is a chance to remind Congress and the administration that it’s time to end track owners’ special tax break.

In 2004, President Bush signed a tax bill chock-full of special interest tax breaks, including one for his NASCAR friends. The legislation allowed track owners to write off the cost of motorsports facilities (track, grandstand, etc.) over seven years for tax purposes. For accounting purposes, these assets are written off over their useful lives, ranging from ten to thirty years. The accelerated write-off allowed by the tax break costs the U.S. Treasury an estimated $40 million per year.

This particular tax break, along with many others known as “the extenders,” expired on December 31 of 2011. With the projected deficits and the clamor for base-broadening corporate tax reform, you’d think this special-interest loophole would be an easy one to keep off the books. Even Oklahoma Republican Senator Coburn has called for its elimination. But Florida Rep. Vern Buchanan is pushing for bringing back the NASCAR tax break, while he’s busy collecting campaign contributions from the industry. And President Obama’s budget proposal also calls for extending it.

An interesting question is whether GOP Presidential hopeful Mitt Romney is a supporter of this tax break, too. As he said in an interview Sunday, “I have friends who own NASCAR teams,” and it turns out some of those friends are also campaign donors.

As governor in Massachusetts, Romney made the decision to close a slew of corporate loopholes that brought in some $370 million to his state’s treasury. Presidential candidate, Romney, however, doesn’t like to talk about that.

So we will see: will we have a presidential race featuring two candidates who try to bolster their blue collar bona fides by supporting the NASCAR track owners’ loophole, or two candidates who mean it when they say they want to simplify the tax code?

Photos of Nascar related materials via Side Hike  and Brian C Creative Commons Attribution License 2.0

Press Release: General Electric’s Ten Year Tax Rate Only Two Percent

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For Immediate Release: February 27, 2012 (rev. 4/12)

Contact: Anne Singer, 202-299-1066, ext. 27

General Electric Paid Only Two Percent Federal Income Tax Rate Over the Past Decade, Citizens for Tax Justice Analysis Finds; Actual Payments Were Probably Lower

Washington, DC – General Electric’s (GE) annual SEC 10-K filing for 2011 (filed February 24, 2012) reveals that the company paid at most two percent of its $80.2 billion in U.S. pretax profits in federal income taxes over the last 10 years.

Following revelations in March 2011 that GE paid no federal income taxes in 2010 and in fact enjoyed $3.3 billion in net tax benefits, GE told AFP (3/29/2011), “GE did not pay US federal taxes last year because we did not owe any.” But don’t worry, GE told Dow Jones Newswires (3/28/2011), “our 2011 tax rate is slated to return to more normal levels with GE Capital’s recovery.”

As it turns out, however, in 2011 GE’s effective federal income tax rate was only 11.3 percent, less than a third the official 35 percent corporate tax rate.

“I don’t think most Americans would consider 11.3 percent, not to mention GE’s long-term effective rate of 1.8 percent, to be ‘normal,’ ” said Bob McIntyre, director of Citizens for Tax Justice.  “But for GE, taxes are something to be avoided rather than paid.”

Citizens for Tax Justice’s summary of GE’s federal income taxes over the past decade shows that:

O From 2006 to 2011, GE’s net federal income taxes were negative $3.1 billion, despite $38.2 billion in pretax U.S. profits over the six years.

O Over the past decade, GE’s effective federal income tax rate on its $81.2 billion in pretax U.S. profits has been at most 1.8 percent.

McIntyre noted that GE has yet to pay even that paltry 1.8 percent. In fact, at the end of 2011, GE reports that it has claimed $3.9 billion in cumulative income tax reductions on its tax returns over the years that it has not reported in its shareholder reports — because it expects the IRS will not approve these “uncertain” tax breaks, and GE will have to give the money back.

GE is one of 280 profitable Fortune 500 companies profiled in “Corporate Taxpayers and Corporate Tax Dodgers, 2008-2010.”  The report shows GE is one of 30 major U.S. corporations that paid zero – or less – in federal income taxes in the last three years.  The full report, a joint project of Citizens for Tax Justice and the Institute on Taxation and Economic Policy, is at Page 24 of the report explains “uncertain” tax breaks.


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 (

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, DC, 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 (


Note: GE’s profits and taxes for 2009 and 2010 have been slightly revised from an earlier version of this release. The earlier version inadvertently used GE’s restated 2009 and 2010 figures from GE’s 2011 annual report. Those restated figures excluded the half of NBC that GE sold to Comcast in 2011, and did not reflect GE’s actual results for those two years.

Avoiding Property Taxes ’til the Cows Come Home in Florida

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What do Tom Cruise and Florida Senator Bill Nelson have in common? Both have taken advantage of a lax definition of what constitutes farming in order to reap large property tax breaks.

The Miami Herald reports that by allowing a few cows to graze on 55 acres of his land, Senator Nelson reduced his property taxes on the land from over $45,000 to just $3,696 in 2011. The reduction results from the fact that a few cows make Nelson’s property suddenly agricultural land, and as such, its value is a mere $210,000, rather than its full market residential value of $2.7 million.

Using a similar tax break in Colorado, Tom Cruise was able to pay only $400 in property taxes on his $18 million, 248 acre tract of land in Colorado by allowing sheep to graze on it for brief periods each year. The good news for Colorado taxpayers is that the state legislature has since taken a small step toward closing the loophole by valuing residences on ‘agricultural land’ at the same rate as they are on residential property.

Rather than just tightening up eligibility requirements though, lawmakers could instead replace current agricultural land valuation systems with an agricultural circuit breaker that makes property tax relief available only to real family farms. This would not only ensure that Senators and movie stars do not abuse the system, it would also better target those farmers most in need of property tax relief – the farmers for whom the tax loopholes were presumably written in the first place.

Photos of Tom Cruise and Senator Bill Nelson via Nasa HQ and Surrealistic Scenes Creative Commons Attribution License 2.0

President Obama’s “Framework” for Corporate Tax Reform Would Not Raise Revenue, Leaves Key Questions Unanswered

February 23, 2012 02:51 PM | | Bookmark and Share

Read the PDF of this report.

The Obama administration has proposed a “framework” for corporate tax reform. Unfortunately, it is designed to be “revenue-neutral,” meaning it would not raise needed revenue to fund public investments, protect important programs such as Social Security and Medicare, or address the budget deficit.

The President’s framework calls on Congress to enact reforms that would, by themselves, raise a little over a trillion dollars over a decade. But all of that revenue would be given back to corporations in the form of new tax cuts.

The President’s plan also fails to answer key questions. First, exactly which tax loopholes would be closed to offset the costs of the proposed new tax cuts and to prevent the corporate tax overhaul from becoming revenue-negative? Second, is the President really proposing to lower taxes for domestic manufacturers like Boeing that have already been allowed to avoid corporate taxes for years? Third, how does the President’s plan for addressing offshore corporate tax avoidance differ from Congressional Republicans’ plan to impose a tiny “minimum tax” on offshore profits after exempting them from the rest of the corporate tax?

Framework Does Not Attempt to Raise Needed Revenue

“The President’s Framework for Business Tax Reform” released by the Treasury Department on February 22 would not attempt to raise additional revenue from corporations to finance public investments or deficit reduction.

The framework would close corporate tax loopholes, but would use the revenue saved to pay for new tax breaks for corporations, including a reduction in the statutory corporate income tax rate from 35 percent to 28 percent. The net result, according to the President, would be no net increase or decrease in corporate tax revenue.

A “revenue-neutral” corporate tax reform should not be enacted.[1] The first goal of corporate tax reform should be to increase the overall amount of tax revenue collected from U.S. corporations, which today pay very low effective tax rates.[2] (Effective tax rates are the percentage of profits that corporations actually pay in corporate income taxes.)

CTJ recently studied most of the Fortune 500 companies that have been profitable in each of the last three years and found that their average effective tax rate during that period was just 18.5 percent.[3] Thirty of the corporations had net negative tax rates (meaning they received money from the Treasury) over the three-year period.

Corporations claim that they are overly burdened by the U.S. corporate income tax, which has a statutory rate of 35 percent. But CTJ’s data demonstrate that most profitable corporations have effective tax rates that are far lower because of the tax loopholes they enjoy.

Which Tax Loopholes Would Be Closed?

The President’s framework is very short on details about which corporate loopholes he wants to close to offset the costs of the tax breaks it includes. In other words, it’s not even clear how a corporate tax reform based on the President’s framework would avoid becoming revenue-negative.

The President has proposed to reduce the statutory corporate tax rate from 35 percent to 28 percent, make certain temporary tax breaks, including the research and experimentation credit, permanent, and add some new business tax breaks.  In total, these tax cuts would cost us about $1.2 trillion over the next 10 years.[4]

Only about a fourth of the revenue-raising provisions needed to offset this cost have been specified by the administration. This $0.3 trillion in tax increases on corporations and other businesses has been proposed in detail as part of President Obama’s most recent budget proposal, which was released about a week earlier. [5] (Most of these tax increases are also described as examples of revenue-raisers in the framework.)

These revenue-raising provisions generally are good policy. For example, the framework and the budget plan would eliminate the “last in, first out (LIFO)” method of manipulating inventory accounting, the many tax subsidies for oil and gas companies, the provisions that allow insurance to be used as a tax shelter, and the “carried interest” loophole that allows wealthy fund managers to pretend they have low-tax capital gains income.

The framework and the budget plan also include some limited proposals to reduce abuses of the rule allowing U.S. corporations to “defer” U.S. corporate taxes on their offshore profits. For example, they would limit deferral of taxes on profits from “intangible” assets in tax havens where no real business is being conducted. They would also end the corporate practice of taking deductions right away against U.S. taxes for expenses related to offshore profits even as they defer U.S. taxes on those profits.

The framework only gives vague suggestions about where the other three-fourths of revenue offsets would come from. The framework hints at other ways in which Congress might find the other $0.9 trillion of revenue needed to offset the tax cuts it proposes. The possibilities include “addressing depreciation schedules” without explaining how, “reducing the bias toward debt financing” without specifying how much, and “establishing greater parity between large corporations and non-corporate counterparts.”

Each of these could be good ideas — if only the administration would lead with strong, detailed proposals. For example, “addressing depreciation schedules” could be a major improvement. Depreciation is basically the deduction a business takes against its taxable income for purchases of buildings or equipment, and since these things do not immediately lose their value (the way inventory might) the deductions are taken over a period of years. If the rules required “economic depreciation,” then companies would take these deductions as the equipment or buildings actually wear out, but in most cases the current rules allow them “accelerated depreciation” which allows them to take these deductions over a much shorter period of time. This provides a huge benefit to businesses that can even wipe out their profits for tax purposes. 

The framework explains that “accelerated depreciation may be a less effective way to increase investment and job creation than reinvesting the savings from moving towards economic depreciation into reducing tax rates.” This is rather surprising coming from an administration that has proposed and enacted its share of depreciation breaks, including allowing companies to “expense” or deduct 100 percent of their investments in a single year.

To take another example, “establishing greater parity between large corporations and their large non-corporate counterparts” could greatly improve and simplify our tax system. This basically refers to the need to address businesses that are large companies but are not organized as the type of corporations that pay the corporate income tax. These businesses are often called “pass-through” entities because the profits pass through to the individual owners and are therefore subject to the personal income tax but not the corporate income tax.

The framework refers to options put forth previously by President George W. Bush’s Advisory Panel on Tax Reform and President Obama’s Economic Recovery Advisory Board. The options explored by the latter include some that are very straightforward but rather limited in scope (like treating any publicly traded company as a corporation that is subject to the corporate income tax) while others would be more far-reaching and more complex.

Determining which businesses must pay the corporate income tax will be important because many pass-through entities are very large companies — like Bechtel, the Tribune Company, many of the top lobbying firms, law firms and hedge funds. It’s difficult to believe that members of Congress will take on these behemoths without more explicit direction from the administration.

Is the President Really Proposing New Breaks for Manufacturers Who Already Avoid Taxes?

The President argues that companies that create jobs in the U.S. deserve tax breaks. However, his decision last week to hold up the aerospace and defense corporation Boeing as a company deserving lower taxes — despite its years and years of completely avoiding corporate taxes — raises more questions than it answers.

Last week, President Obama told a crowd at a Boeing plant in Washington State that companies that use tax breaks to shift operations and profits offshore ought to pay more U.S. taxes and the revenue “should go towards lowering taxes for companies like Boeing that choose to stay and hire here in the United States of America.”

Over the past ten years, Boeing has paid nothing in net federal income taxes, despite $32 billion in pretax U.S. profits. On the contrary, Boeing has actually reported more than $2 billion in negative total federal taxes over that period. Only twice in the last 10 years has Boeing reported a positive federal income tax liability. In each of the other eight years, including the last four, Boeing’s federal income taxes were negative.[6]

The President’s framework would reduce the nominal corporate tax rate for profits from domestic manufacturing to 25 percent.

This would be accomplished by changing the existing tax deduction for domestic manufacturing. The existing deduction allows companies to reduce their income for tax purposes by 9 percent of any income that comes from manufacturing in the U.S. With the current statutory corporate tax rate of 35 percent, this break reduces the effective corporate tax rate for profits from domestic manufacturing to 31.5 percent (at most).

Currently, only about two-thirds of the existing deduction for domestic manufacturing goes towards companies that the IRS characterizes as “manufacturing” companies. The other third goes towards information technology, mining, construction, utilities and many other types of companies.[7] (The 2004 law creating the deduction defined “manufacturing” quite loosely.) Apparently, this is what would change under the framework’s proposal to “focus the deduction more on manufacturing activity.”

The framework would “expand the deduction to 10.7 percent” for those companies that would still be allowed to receive it. This would lower the effective corporate tax rate for profits from domestic manufacturing from 28 percent (the statutory corporate tax rate under the framework) to 25 percent (at most). The deduction would be even more generous for “advanced manufacturing.”

Obviously, companies like Boeing, General Electric and Honeywell that have negative tax rates on their U.S. corporate profits do not need more breaks to encourage them to base their operations domestically rather than abroad.

In fact, CTJ’s recent study of Fortune 500 corporations found that about two-thirds of the corporations with significant offshore profits actually paid lower taxes on their U.S. profits than they paid to foreign governments on their foreign profits.[8] These companies already enjoy loopholes that enable them to pay lower taxes in the U.S. than they pay abroad. For these companies, taxes are apparently not the reason why they choose to conduct some of their business offshore.

Of course, there is a serious problem with some countries that have no corporate income tax at all, or an extremely low corporate income tax. These countries are offshore tax havens like the Cayman Islands or Bermuda. There is no way the U.S. can “compete” with these countries by lowering its tax rate. How the framework deals with this problem is the next question to be addressed.

How Would the International Tax Rules Differ from those Proposed by Congressional Republicans?

The administration will have to take a much firmer stance on how Congress should reform the international corporate tax rules that currently facilitate corporations shifting jobs and profits offshore. The administration must firmly oppose any move to a “territorial” tax system, which essentially would exempt U.S. corporations’ offshore profits from U.S. taxes.

The President’s framework does reject a “pure territorial system,” but since no country in the world has a truly “pure territorial system,” this does not offer much guidance.

A territorial system would increase the existing incentives for U.S. corporations to move their operations offshore or use accounting gimmicks to make their U.S. profits appear to be “foreign” profits generated in offshore tax havens.[9]

The “minimum tax” on offshore profits proposed as part of the framework may not remedy this problem at all, especially given that the administration has not even specified a rate for a minimum tax.

Indeed, the President’s framework might even be compatible with the corporate tax overhaul proposed by Dave Camp, the Republican chairman of the House Ways and Means Committee. Camp has put forward broad outlines of a plan that would enact a territorial tax system but would effectively impose a tiny 1.25 percent tax on offshore profits of U.S. corporations. Hopefully, this is not the minimum tax the administration has in mind.

Of course, the President may be contemplating a much higher “minimum” tax rate on offshore profits. This could reduce or even eliminate the incentives for corporations to shift jobs and profits offshore. But at this point, we just don’t know.



Appendix: Why Did Some News Reports Say the President’s Corporate Tax Framework Would Raise Revenue?

Some media outlets have reported that the President’s corporate tax reform “framework” would raise $250 billion over a decade. This is incorrect. The administration asserts that the combination of closing corporate tax loopholes and reducing the corporate tax rate will yield $250 billion over a decade — but then proposes to use all of this $250 billion to pay for additional tax breaks that mostly go to businesses. These tax breaks are called the “tax extenders” by Congressional insiders and lobbyists because they are temporary tax breaks that Congress extends every couple of years after they have expired. Making these breaks a permanent part of the tax code, as the administration proposes, does nothing to make our corporate income tax simpler, more efficient, or more adequate to meet our pressing budget needs.*

The confusion arises from the administration’s argument (made explicit on page 18 of the “framework”) that making these tax breaks permanent and offsetting the costs by closing corporate tax loopholes is fiscally responsible compared to Congress’s current practice of periodically extending these tax breaks without offsetting their costs at all. This sets the bar for fiscal responsibility absurdly low. Using revenue savings from corporate tax reform to finance unnecessary tax breaks for corporations and other businesses does not improve our nation’s fiscal health.

* The largest of the “tax extenders” is the research credit, a tax break that is supposed to, but has not been proven to, encourage research. See Martin A. Sullivan, “Time to Scrap the Research Credit,” Tax Notes, February 22, 2010.


[1] Last year, 250 organizations, including organizations from every state in the U.S., joined Citizens for Tax Justice in urging Congress to enact a corporate tax reform that raises revenue. Letter to Congress, May 18, 2011, These organizations believe that it’s outrageous that Congress is debating cuts in public services like Medicare and Medicaid, allegedly to address a budget crisis, and yet no attempt will be made to raise more revenue from profitable corporations.

[2] A CTJ fact sheet explains why corporate tax reform should be revenue-positive. Citizens for Tax Justice, “Why Congress Can and Should Raise Revenue through Corporate Tax Reform,” November 3, 2011.

[3] Citizens for Tax Justice, “Corporate Taxpayers & Corporate Tax Dodgers, 2008-2010,” November 3, 2011.

[4] The largest portion of this cost would come from reducing the corporate tax rate. The Congressional Budget Office estimates that the corporate income tax will collect $4.36 trillion over the next decade. See Congressional Budget Office, “The Budget and Economic Outlook: Fiscal Years 2012 to 2022,” January 31, 2012. Reducing the corporate income tax rate from 35 percent to 28 percent would reduce corporate tax revenue by $872 billion. (35-28)/35*4,360 = 872.

[5] President Obama’s most recent budget plan would raise $350 billion over a decade through business tax reforms. See Citizens for Tax Justice, “President Obama’s 2013 Budget Plan Reduces Revenue by Trillions, Makes Permanent 78 Percent of Bush Tax Cuts,” February 14, 2012, page 4. If the corporate income tax rate is just 28 percent (as proposed under the President’s framework), these reforms will raise less revenue than they would under the current rate of 35 percent. Under a 28 percent rate, they would raise $280 billion over a decade, roughly 0.3 trillion dollars over a decade. 28/35*350 =280.

[6] Citizens for Tax Justice, “Obama Promoting Tax Cuts at Boeing, a Company that Paid Nothing in Net Federal Taxes Over Past Decade,” February 17, 2012.

[7] Nicholas Johnson and Ashali Singham, “States Can Opt Out of the Costly and Ineffective ‘Domestic Production Deduction’ Corporate Tax Break,” January 14, 2010, page 4.

[8] Citizens for Tax Justice, “Corporate Taxpayers & Corporate Tax Dodgers, 2008-2010,” November 3, 2011, page 10.

[9] A CTJ fact sheet explains why Congress should reject any proposal to exempt offshore corporate profits from U.S. taxes. Citizens for Tax Justice, “Why Congress Should Reject A ‘Territorial’ System and a ‘Repatriation’ Amnesty: Both Proposals Would Remove Taxes on Corporations’ Offshore Profits,” October 19, 2011.

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Quick Hits in State News: Business Advocate Opposes Business Tax Breaks in Georgia, and More

  • Two of the country’s largest Big Box retailers, Target and Best Buy, are turning up the pressure on their home state of Minnesota’s legislators to pass a law requiring online businesses to collect sales taxes.  Republican lawmakers are divided over the issue because some see the so-called “Amazon” tax as a tax increase which they adamantly oppose.  One Republican House member, however, came up with a compromise: use the revenue gained from taxing internet sales to pay for an “outdoors, guns, and ammo” sales tax holiday. Huh?
  • The Idaho Mountain Express editorial board gets it right when it opines  against Governor Otter’s proposal to cut taxes by $45 million, “just when things are looking up, would any sensible family insist that its wage earners take jobs that pay less? That’s absurd and so are the proposed tax cuts.”
  • In the refreshing news department, the former CEO of the Georgia Chamber of Commerce comes out against a business tax credit bill saying, “credits like those proposed in House Bill 868 could inadvertently undermine our state’s economy by diverting revenue from equally essential investments.” Here’s another gem, “To thrive, businesses large and small need a well-educated workforce, good transportation systems to facilitate their supply-chain, and stable, safe neighborhoods for employees and customers. They also need customers with sufficient income to buy their goods and services, something that tax credits cannot assist.” We couldn’t have said it better ourselves.
  • The Orlando Sentinel wisely editorializes against Florida lawmakers cutting state revenues to cities and counties. “[C]utting taxes is easy; paying for it is hard,” they write. “And lawmakers have been dumping much of that dirty work on local government leaders.” A former mayor now in the state legislature is quoted: “We’re trying to take credit for cutting taxes when we’re, in essence, really just telling somebody else, ‘You need to cut.'” 


New Jersey Governor Chris Christie Promotes Same Old Tired Arguments for Cutting Taxes

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Last month, New Jersey Governor Chris Christie made a bold and reckless promise to cut personal income taxes across the board. 

Christie used his annual budget address this week to spout conservative talking points to justify his tax cut plan.  There are two claims in particular we take issue with: the idea that high tax rates harm economic growth; and that high tax rates cause families to flee states.

From Christie’s speech:

First, any job growth plan for New Jersey has to start with cutting taxesSo, to the naysayers, I say this. We have been down the road of high taxation. It didn’t work. The result was high unemployment, high taxes and low growth. The result was families leaving New Jersey.  The old way was a dead end for New Jersey. High taxes and excessive spending left us stranded in a world of declining growth, declining prospects and a diminished ability to compete as a state.”

Christie’s claim that cutting taxes will lead to job growth is one of the most frequently repeated talking points used by conservative lawmakers seeking to reduce or eliminate state personal income taxes. 

Two new reports from ITEP clearly dispel this conservative tenet. “’High Rate’ Income Tax States Are Outperforming No-Tax States” explains that the nine states with the highest top marginal tax rates (New Jersey included) are outperforming the nine states without income taxes, in terms of both growth in economic output per person and median income levels. 

Between 2001-2010, New Jersey beat six out of nine states with no-personal income tax in terms of lowest unemployment rate.  And over the same time period, New Jersey topped four out of nine no-tax states in terms of economic growth per-capita.

A second report, “Athur Laffer Regression Analysis is Fundamentally Flawed, Offers No Support for Economic Growth Claims” shows that an analysis on which tax-cutters like Christie rely, that predicts huge economic gains as a result of cutting state personal income taxes, is fundamentally flawed. 

The conclusion of both reports: there is simply no evidence that state income tax rates harm state economies (or the national economy, but that’s another matter).

Then Christie invoked the millionaire-migration canard:

“Our tax rates, and our overall tax burden, were also the worst in the region. And the effects were being felt: a study by scholars at Boston College found that $70 billion of wealth had left the state in the prior five years. That exodus hurt jobs, economic growth and yes, even state tax revenues…”

This claim – that high taxes will (and have) force wealthy New Jerseyans to flee the state – is yet another unfounded conservative myth

In fact, as ITEP has pointed out in the past, the Boston College study Christie referenced made no mention of taxes at all, let alone in New Jersey families’ migration decisions.  A second study that actually looked at the role of taxes in New Jersey migration decisions (which Christie did not mention), found the impact of the state’s “half-millionaires’ tax” on New Jersey’s high-income earners was “small,” and that the change in the net out-migration rate following the enactment of the tax was “negligible.”  The researchers for this second study also review Census Bureau interviews that show that while people gave a lot of reasons for leaving the state – retirement, new jobs, family needs – none reported they were leaving because of tax rates. 

Photo of Governor Chris Christie via  Bob Jagendorf Creative Commons Attribution License 2.0

Citizens for Tax Justice Responds to President Obama’s Corporate Tax Proposal: President’s ‘Framework’ Fails to Raise Revenue

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Today the Treasury Department released “The President’s Framework for Business Tax Reform” outlining the Obama Administration’s ideas for corporate tax reform. Citizens for Tax Justice has been generating research on corporate taxes for over 30 years, most recently with its November, 2011 report, Corporate Taxpayers and Corporate Tax Dodgers, 2008-2010.  In response to the White House and Treasury Department release today, Citizens for Tax Justice Director, Bob McIntyre, issued the following statement:

“The corporate tax reform ‘framework’ released by the Obama administration today fails to raise revenue that could be used to make public investments in America’s economy and America’s future.

“The President has proposed to reduce the statutory corporate tax rate from 35 percent to 28 percent, make certain temporary tax breaks, including the research and experimentation credit, permanent, and add some new business tax breaks.  In total, these tax cuts would cost us about $1.2 trillion over the next 10 years.

“To offset this cost, the President proposed in his fiscal 2013 budget to raise about $0.3 trillion from closing or reducing business tax loopholes.  That leaves almost $1 trillion in further business tax reforms that would be necessary for the tax plan to break even, as the President say he wants to do. His ‘framework,’ however, leaves the sources of this $0.9 trillion in offsetting reforms mostly unspecified.

“We can and should collect more tax revenue from corporations. Right now, America’s biggest and most profitable corporations are paying, on average, a ridiculously low amount in federal income taxes, and many of them are paying nothing at all.

“Last year, 250 organizations, including organizations from every state in the U.S., joined us in urging Congress to enact a corporate tax reform that raises revenue. These organizations believe that it’s outrageous that Congress is debating cuts in public services like Medicare and Medicaid to address an alleged budget crisis and yet no attempt will be made to raise more revenue from profitable corporations.

“It’s very disappointing that the President has proposed what is at best ‘revenue-neutral’ corporate tax reform.  In 1986, President Reagan and Congress passed a tax reform act that increased corporate tax payments by more than a third.  In today’s terms, that would be a corporate tax increase of more than a trillion dollars over the next 10 years. The corporate tax reform that we need today should do no less.”

CTJ has published a fact sheet explaining why corporate tax reform should be revenue-positive and a fact sheet explaining how the international corporate tax rules should be reformed.

Photos of President Obama and Secretary Geithner via Downing Street and World Economic Forum Creative Commons Attribution License 2.0

Quick Hits In State News: A Good Bill With a Dim Future in New Mexico, and More

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