This Holiday, The Tax Justice Team Is Thankful For…

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During Thanksgiving we tend to reflect on the year’s events and remember what we’re grateful for. This was a doozy of a year for tax analysts, with the federal government shutting down and state legislatures across the nation threatening deep cuts to major sources of revenue. But, nonetheless, as we look back on the year we have many things to be grateful for:

— That the taxes we all pay help make our communities, our states and country stronger and more vibrant.  Our tax dollars are used to provide public education, clean air and water, well-connected road and public transit systems, safe streets, affordable health care, and income supports for working families.

— That every state that started 2013 with a personal income tax continues to have one, despite efforts in LouisianaNebraska, and North Carolina to dismantle their most progressive form of taxation.

— That poor families in Colorado, Iowa, Minnesota, Oregon, the District of Columbia, and Montgomery County, Maryland will find it a little easier to make ends meet now that lawmakers in those states and localities approved expansions to various low-income tax credits.

— For the Americans who have demanded that Congress address the tax avoidance uncovered by CTJ and carried out by huge corporations like GE, Apple, and Boeing.

— That CTJ’s proposal to increase the Medicare payroll tax for the wealthy, and subject their investment income to the same type of tax, is part of the health care reform law in effect now.

— That Senator Max Baucus’s tax reform proposals (so far) do not give corporations their dream of ending all U.S. taxes on profits they claim to earn offshore and that many members of Congress are signalling a new seriousness about closing loopholes that allow corporations to shift profits into offshore tax havens.

Additionally, we thank our donors and friends for making our work possible.  Unlike other groups, who have one large benefactor, CTJ and ITEP rely on our thousands of supporters for funding.  2013 has been a banner year for CTJ and ITEP as we have seen a dramatic increase in online contributions, but our work has never been so important, so please consider CTJ or ITEP in your holiday giving to help us prepare for the tax fights ahead in 2014.

We wish you all a very happy Thanksgiving!

American Express Uses Offshore Tax Havens to Lower Its Taxes

November 26, 2013 02:53 PM | | Bookmark and Share

Read this report in PDF.

American Express’s Tax Avoidance Opposed by Most Small Businesses

Since 2010, American Express has boosted itself as a supporter of small businesses, by promoting “Small Business Saturday” as a counterpart to Black Friday. But American Express is no friend of American small business. Not only does it charge merchants high swipe fees, but it also uses and wants to expand offshore tax loopholes that most small businesses can’t use and want to close.

According to its SEC filings, American Express is holding $8.5 billion in low-tax offshore jurisdictions, including at least 22 offshore subsidiaries in 8 jurisdictions typically identified as “tax havens.” By its own estimates, American Express has avoided paying $2.6 billion in U.S. taxes by holding these profits offshore. To give some perspective, this amount is two and half times the budget of the entire Small Business Administration.[i]

Even on the $21.3 billion in pretax profits that American Express officially earned in the U.S. over the past five years, the company has paid only half the 35 percent federal statutory tax rate. This means that over the past five years, American Express received over $3.7 billion in tax subsidies through the US tax code.

Not satisfied with its current slate of loopholes, American Express is now part of the coalition behind the Campaign for Home Court Advantage,[ii] which advocates sharply expanding offshore loopholes by moving the United States to a territorial tax system.[iii] In contrast, as many as three-quarters of small business owners believe that their small business is harmed when loopholes allow big corporations to avoid taxes.”[iv]

While American Express pretends to support small business this Saturday, remember that the company supports rigging the tax system against those same small businesses they claim to support.

[i] Office of Management and Budget, “The Budget for Fiscal Year 2014, Historical Tables”,

[ii] Citizens for Tax Justice, “Corporate-Backed Tax Lobby Groups Proliferating,” August 21, 2013.

[iii] Citizens for Tax Justice, “ Fact Sheet: Why Congress Should Reject A Territorial System and a Repatriation Amnesty,” October 9, 2011.

[iv] The American Sustainable Business Council “Small Business Owners’ Views on Taxes and How to Level the Playing Field with Big Business,” February 6, 2012.

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Scott Walker’s Tax Record Will Be on the Wisconsin Ballot Next Year

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Voters in 36 states will be choosing governors next year.  Over the next several months, the Tax Justice Digest will be highlighting 2014 gubernatorial races where we expect taxes to be a key issue. Today’s post is about the race for the Governor’s mansion in Wisconsin.

To many Wisconsinites, it may seem like yesterday that Governor Scott Walker survived a recall election against Milwaukee Mayor Tom Barrett. But in less than a year, he’ll be up for reelection. This time Mary Burke, a Trek Bicycle Corp. executive and state Commerce Department secretary, is the Democrat hoping to unseat him.  During the campaign, Walker will most certainly tout his record of cutting taxes, but anyone who’s paid attention knows his record is nothing to be proud of.

This year alone he signed legislation that both cut property taxes and reduced income tax rates in a way that does little for Wisconsin’s neediest residents – the opposite, actually. In fact, the budget he introduced in 2011 was called a betrayal of Wisconsin values by the Center on Wisconsin Strategy and other public interest groups because he ultimately approved legislation that reduced the Earned Income Tax Credit (EITC), thus increasing taxes on the state’s poorest working families. That budget also included $2.3 billion in tax breaks over a decade, in the form of a domestic production activities credit, two different capital gains tax breaks for the rich, and a variety of new sales tax exemptions, including for snowmaking and snow grooming equipment.

Challenger Mary Burke is being cautious and has yet to put out her own tax plan. She recently told the Milwaukee Journal Sentinel, however, that she would not take a pledge to not increase taxes, saying, “I’d want to look at the totality. We collect revenue in a lot of different ways. I certainly wouldn’t look at raising (taxes), but I’d also want to look at it in the context of our finances, our budgets …” When we learn more about her plan, we’ll review it for you here.


Gas Tax Reform Draws Close in Pennsylvania as Debate Continues in 3 More States

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Update: Pennsylvania Governor Tom Corbett signed the gas tax increase described below into law on November 25, 2013.

One of 2013’s biggest state tax policy issues—the gasoline tax—continues to make headlines long after most state legislative sessions have come to a close for the year.  We’ve already written about how lawmakers in Maryland, Massachusetts, Vermont, Virginia, Wyoming, and the District of Columbia enacted gas tax increases or reforms earlier this year.  But within just the last week, four more states have been in the news with high-profile proposals to raise their own gas taxes—including Pennsylvania, which appears to be on the verge of both increasing and reforming its tax.  Here’s what’s been happening:  

Pennsylvania is one of a small number of states where the legislature is still in session (most state sessions ended this spring).  This week, both the Pennsylvania House and Senate passed a bill that would gradually raise the gas tax by allowing it to rise alongside gas prices, much like an ordinary sales tax.  This is not a new idea in the Keystone State.  Prior to 2006, Pennsylvania’s gas tax actually functioned in exactly this manner, though the 32.3 cent tax has since run up against a poorly designed gas tax “cap” that the legislature is now seeking to lift.  When combined with increases in vehicle registration fees, license fees, and traffic fines, the overall package is expected to raise $2.3 billion per year for roads and transit.  As of this writing the bill needs to be approved by the House one more time before going to Governor Tom Corbett’s desk where it is expected to be signed into law.

In Washington State, The Olympian is reporting that “a bipartisan transportation revenue package now looks possible” after the coalition of lawmakers in control of the state senate backed an 11.5 cent gas tax increase.  The tax increase would be phased-in over the course of three years and is actually somewhat larger than the 10 cent increase sought by Governor Jay Inslee and House Democrats earlier this year.  As we explained in June, Washington’s gas tax would remain relatively low by historical standards even if the Governor’s 10 cent increase had been enacted into law.  The same is true of an 11.5 cent increase.  Lawmakers could potentially act on the 11.5 cent plan within the next few weeks if a special legislative session is called.

Utah business leaders, local officials, and other stakeholders are continuing to make the case that public investments in infrastructure will help the state’s economy succeed, and that the gas tax is the best way to pay for those investments.  On Wednesday, local officials testified before an interim transportation committee in support of a plan to allow localities to levy a 3 percent gas tax.  Unlike Utah’s fixed-rate gas tax—which actually stands at its lowest level in history as a result of inflation—this 3 percent tax should do a reasonably good job keeping pace with future growth in the cost of transportation construction and maintenance.  At the same hearing, a Republican state representative testified in support of his own plan to raise the state’s gas tax by 7.5 cents per gallon, phased-in over the course of five years.

The gas tax has been a frequent topic of discussion in Iowa these last few years, and it doesn’t seem like that’s about to change any time soon.  As in Utah, Iowa’s gas tax is at an all-time low (after adjusting for inflation), but one of the state’s candidates for governor in 2014 would like to change that.  Democrat Jack Hatch has proposed raising the tax by a total of 10 cents over the course of 5 years.  Current Governor Terry Branstad, who is eligible to seek reelection next year, is noticeably less excited about the idea.  But Branstad has said he won’t veto a gas tax increase if one makes it to his desk.

Why Everyone Is Unhappy with Senator Baucus’s Proposal for Taxing Multinational Corporations

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Max Baucus, the Senator from Montana who chairs the committee with jurisdiction over our tax code, has made public a portion of his ideas for tax reform. Multinational corporations that have lobbied Baucus for years are unhappy because his proposal would (at least somewhat) restrict their ability to shift jobs and profits offshore. Citizens for Tax Justice and other advocates for fair and adequate taxes are unhappy because his proposal would not raise any new revenue overall — at a time when children are being kicked out of Head Start and all sorts of public investments are restricted because of an alleged budget crisis.  

The Need for Revenue-Raising Corporate Tax Reform

Materials released from Senator Baucus’s staff explain that this part of his proposal is “intended to be revenue-neutral in the long-term.” The idea behind “revenue-neutral” corporate tax reform is that Congress would close loopholes that allow corporations to avoid taxes under the current rules, but use the savings to pay for a reduction in the corporate tax rate.

Among the general public, there is very little support for this. The Gallup Poll has found for years that more than 60 to 70 percent of Americans believe large corporations pay “too little” in taxes.

There is almost no public support for the specific idea of using revenue savings from loophole-closing to lower tax rates. A new poll commissioned by Americans for Tax Fairness found that when asked how Congress should use revenue from “closing corporate loopholes and limiting deductions for the wealthy,” 82 percent preferred the option to “[r]educe the deficit and make new investments,” while just 9 percent preferred the option to “[r]educe tax rates on corporations and the wealthy.”

Of course, Baucus also says that he “believes tax reform as a whole should raise significant revenue,” which would mean that reform of the personal income tax would raise revenue. But there are questions about how that can work, given that he also wants to reduce personal income tax rates.

A growing number of consumer groups, faith-based groups, labor organizations and others have called on Congress to raise revenue from reform of the corporate income tax, as well as from reform of the personal income tax. In 2011, 250 organizations, including groups from every state, signed a letter to lawmakers calling for revenue-positive corporate tax reform, and a similar letter in 2012 was signed by over 500 organizations.

CTJ has repeatedly demonstrated that most corporate profits are not subject to the personal income tax and therefore completely escape taxation if they slip out of the corporate income tax. We have also explained that the corporate income tax is a progressive tax, which is needed in a tax system that is not nearly as progressive as most people believe.

The Need to Stop Corporations from Shifting Jobs and Profits Offshore

While CTJ and other tax experts are still going through the fine print of Baucus’s proposal to understand its full impact, it is clear to us that the proposal would stop some American corporations from using offshore tax havens to avoid U.S. taxes as successfully as they do today. Some multinational corporations are upset by this, but that doesn’t in itself mean that Baucus’s proposal is extremely strict.

CTJ has demonstrated that several very large and profitable corporations — like American Express, Apple, Dell, Microsoft, Nike and others — are making profits appear to be earned in offshore tax havens so that they pay no taxes on them at all. Any proposal that makes the code even slightly stricter will cause these companies to pay more and, naturally, cause them to complain bitterly. 

These companies are taking advantage of the most problematic break in the corporate income tax, which is “deferral,” the rule allowing American corporations to “defer” (delay indefinitely) paying U.S. corporate income taxes on the profits of their offshore subsidiaries until those profits are officially brought to the United States. Deferral is really a tax break for moving operations offshore or for using accounting gimmicks to make U.S. profits appear to be generated in a country with no corporate income tax (like Bermuda or the Cayman Islands or some other tax haven).

CTJ has long argued that the best solution is to simply repeal deferral and subject all profits of our corporations to U.S. corporate taxes in the year they are earned, no matter where they are earned. (We already have a separate foreign-tax-credit rule that reduces U.S. corporate taxes to the extent that companies pay corporate taxes to other countries, to prevent double-taxation.) Barring this, Congress could at least curb the worst abuses of deferral with the type of reforms proposed by Senator Carl Levin.

The big multinational corporations lobbied Baucus and others to expand deferral into an even bigger break, an permanent exemption for offshore profits, often called a “territorial” tax system, which CTJ and several small business groups, consumer groups and labor organizations have always opposed.

Baucus did not propose either approach. His proposal is somewhat like a territorial tax system except that he would place a minimum tax on the offshore profits of American corporations, which would take away much of the advantage that the corporations thought they might obtain after their years of lobbying. American multinational corporations would be required to pay a minimum level of tax on their offshore profits, during the year that they are earned.

But if a corporation is paying corporate taxes to a foreign government at a rate as high or higher than the U.S. minimum tax, there would never be any U.S. taxes on the profits generated in that country. This means that offshore profits of American corporations would still be subject to a lower tax rate than domestic profits, which may preserve some incentive to shift jobs and profits offshore.

Baucus proposes two different versions of a minimum tax. One would require that profits generated in other countries be taxed at a rate that is at least 80 percent of the regular U.S. corporate tax rate. Baucus has not yet revealed what corporate tax rate he will propose, but if one assumes it is 28 percent, that would mean that the foreign profits must be taxed at a rate of at least 22.4 percent. If they are taxed by the foreign country at a rate of, say, 18 percent, that would mean the corporation would pay U.S. corporate taxes of 4.4 percent. (18+4.4=22.4)

The second option Baucus offers would require that “active” profits generated abroad be taxed at a rate that is 60 percent of the U.S. tax rate while “passive” profits generated abroad be taxed at the full U.S. rate (both before foreign tax credits). The concept of “active” income and “passive” income already is a major part of our tax code, but Baucus would define them differently for this option. The basic idea is that “passive” income (like interest payments, rents and royalties) is income that is extremely easy to move from one subsidiary to another and therefore easily used for tax avoidance if it’s not taxed at the full U.S. rate. 

The Baucus proposal has several other innovations that are too numerous to fully explain here. To give one example, the proposal says that if an American corporation has a subsidiary in another country that earns profits by selling to the U.S. market, those profits would be subject to the full U.S. corporate tax rate in the year that they are earned. How well this would work might depend heavily on how easily this can be administered.

Since there are no public estimates of the revenue impacts of the provisions Baucus has proposed, it is not yet clear how important many of them are. Stay tuned as we examine this proposal and learn more.

Job Posting: CTJ and ITEP Seek Communications Director

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(View as a PDF)

Tax Policy Advocacy Communications Director:

The Institute on Taxation and Economic Policy and Citizens for Tax Justice are seeking an experienced and mission-driven Communications Director to help us expand our reach and impact as the only dedicated tax policy organizations advocating for low- and middle-income Americans.

The CTJ/ITEP Communications Director is involved hands-on with outreach to multiple audiences: the news media, the new media, federal and state lawmakers, national and state policy and coalition partners, donors, supporters and social media networks. Collaborating with the federal and state policy teams, the Communications Director plays a key role in planning and strategizing report releases, press statements, press releases, press events, blog posts and op-eds. The Director also works with the Development Director on a quarterly donor newsletter and other fundraising writing and activities.  The Communications Director also edits and manages the blog and social media channels.  It is a small organization; the Communications Director supervises no personnel at this time.

Applicants should possess the following skills, characteristics and experience:
-Minimum six years experience and strong track record in nonprofit, political or advocacy media relations.
-Experience managing or directing communications programs or projects.
-Excellent writing skills across a range of genres, and experience editing policy writing.
-Ability to work independently and to manage up.
-Ease and familiarity with digital media and systems – blog interfaces, Twitter, e-blast software, etc.
-Ability to collaborate on communications projects with state and federal coalition partners.

How to Apply:

-Submit a cover letter describing your interest in the issue and your relevant experience. Please also mention two or three examples of successful communications projects or efforts for which you were responsible, and your measures for those successes, too.

-Provide us with your resume.

-Send these two documents to and we will acknowledge receipt.

-Please, no phone calls.

We seek to fill the position quickly. The deadline for submitting resumes and cover letters is December 1, 2013. We will be scheduling interviews December 2 through 13. Candidates invited for interviews will also be asked to perform a short writing assignment, provide three professional references and indicate their desired salary range and available start date.

Salary will be commensurate with experience; benefits are very generous.


CTJ is a 501(c)(4) organization that advocates progressive tax policies with a focus on federal legislative issues. ITEP is the corresponding 501(c)(3) organization researching tax fairness issues. ITEP works primarily on state tax issues but also provides research on federal tax issues to CTJ. For more information about our work, visit CTJ at or ITEP at


State News Quick Hits: Expert Advice Versus Politics in DC, NE, NY and KY

The District of Columbia’s Tax Revision Commission heard from the Institute on Taxation and Economic Policy (ITEP, CTJ’s partner organization), last week about options for lessening the regressivity of DC’s tax system. In testimony before the Commission, ITEP’s Matt Gardner explained how enhancements to DC’s standard deduction, personal exemption, and Earned Income Tax Credit (EITC) could be enacted without breaking the bank, as long as they’re paired with reforms like phasing-out exemptions and deductions for high-income taxpayers, or eliminating the District’s unusual tax break for out-of-state bond interest.

We got our first glimpse this week of what tax reform could mean for Nebraskans next year.  Members of Nebraska’s Tax Modernization Committee sketched out details of a potential tax reform proposal, but will wait until next month to finalize the plan.  And so far, it looks like the Committee will be sticking to modest, sensible ideas like expanding the sales tax to some household services, indexing tax brackets for inflation, and cutting property taxes (slightly). Considering that Governor Dave Heineman’s commitment to doing away with the personal income tax (or at least significantly cutting it) is the reason for the Committee’s existence, it is a positive sign that its members are steering clear of more radical changes to the income tax.

New York Governor Andrew Cuomo’s first appointed tax commission, the one charged with finding revenue-neutral options to reform the state’s tax system, released its recommendations last week for making the state’s tax code “simpler and fairer”.  Our friends at the Fiscal Policy Institute and New Yorkers for Fiscal Fairness called the recommendations “a smorgasbord of reforms with a little something for everyone.”  The ideas include: expanding the sales tax base to services and currently exempted goods and using the new revenue to cut taxes for low- and middle-income families; reforming the corporate and bank franchise tax; and exempting middle-income families from New York’s estate tax. The question now is whether the Governor, (who can hardly find a tax he doesn’t hate), will consider these recommendations. Or, whether he will only focus on ideas coming from a second tax committee he appointed, with former Governor George Pataki at its helm, which is tasked with finding ways to simply cut $2 to $3 billion in taxes next year.

Last September, recommendations from Kentucky’s Blue Ribbon Commission on Tax Reform were released. ITEP deemed the Commission’s 453 page final report filled with tax reform recommendations “worth legislative consideration.” Yet, the Lexington Herald-Leader is reporting that, like the eight other previous tax studies, this report is simply “gathering dust.” Some lawmakers say that 2014 isn’t the year for tax reform, citing a difficult “political climate.” Let’s hope the tide changes and all the Commission’s work doesn’t go unutilized given the fiscal stress the state is already under.

Statement from CTJ Director Robert McIntyre: Is the Baucus Plan for Multinational Corporations a Prelude to a Middle-Class Tax Increase?

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Senate Finance Committee Chairman Max Baucus (D-Mont.) today released a draft proposal for changing the way the United States taxes multinational corporations. Robert McIntyre, the director of Citizens for Tax Justice, made the following statement about the draft:

“Senator Baucus promises that his proposals will not increase the paltry federal income taxes that multinational corporations now pay. He also promises that he will later propose changes to the taxes on domestic corporations, which will also be ‘revenue-neutral.’ And he also says that he ‘believes tax reform as a whole should raise significant revenue.’

“That must mean that Baucus plans to propose ‘significant’ increases in personal income taxes (or some new tax). Will this mean higher taxes on the rich? That seems unlikely, since Baucus is expected to propose a considerably lower top personal income tax rate. So that apparently will leave the middle class and maybe the poor holding the bag.

“That is certainly not what most Americans think tax reform should be about. Lawmakers should instead reform the corporate income tax in a way that raises significant revenue.”

Poll Shows Almost No Support for Using Savings from Loophole-Closing to Lower Tax Rates

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A poll commissioned for Americans for Tax Fairness and released on November 13 shows almost no public support for the “revenue-neutral” approach to tax reform advanced by Rep. Dave Camp, the chairman of the House Ways and Means Committee.

One question put to respondents was how Congress should use revenue from “closing corporate loopholes and limiting deductions for the wealthy.”

To this, 82 percent preferred the option to “Reduce the deficit and make new investments,” while just 9 percent preferred the option to “Reduce tax rates on corporations and the wealthy.”

What 9 percent chose is basically the approach to tax reform laid out by House Budget Committee chairman Paul Ryan (in the various version of the infamous “Ryan Plan”) as well as the approach laid out by Ways and Means Chairman Dave Camp. Both have said that tax loopholes and tax breaks should be reduced and/or eliminated and the revenue savings should be used to offset reductions in tax rates, including reducing the top personal income tax rate and the corporate income tax rate to 25 percent.

Of course, Camp and Ryan present their approach as more than simply reducing rates for corporations and wealthy individuals. They will continue to make the case that they can include provisions that help middle-income Americans directly.

But this will be an impossible case for them to make. After Ryan released the most recent version of his plan, CTJ demonstrated that the tax reform section would provide those whose annual income exceeds a million dollars with an average tax cut each year of at least $200,000. In other words, even if Congress eliminated all of the tax loopholes and tax breaks that Ryan put on the table, millionaires would still end up with a huge net tax cut because of the rate reductions. And if the plan would be implemented in a way that is truly “revenue-neutral” as Ryan and Camp claim, that would mean someone further down on the income ladder would have to pay more than they pay today.

The budget resolution approved by the Democratic majority in the Senate in the spring called for raising $975 billion in taxes over a decade from corporations and wealthy individuals. President Obama has taken a disappointing middle ground, arguinug that reform of the personal income tax should raise revenue, but reform of the corporate income tax (and the personal income tax insofar as it affects businesses) should be revenue-neutral.

New CTJ Report: Boeing, Recipient of the Largest State Tax Subsidy in History, Paid Nothing in State Corporate Income Taxes Over the Past Decade

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On November 12th, Washington Governor Jay Inslee signed into law the largest state business tax break package in history for Boeing. The new law will give Boeing and its suppliers an estimated $8.7 billion in tax breaks between now and 2040. Even before this giant new subsidy, Boeing has already been staggeringly successful in avoiding state taxes. Over the past decade, Boeing has managed to avoid paying even a dime of state income taxes nationwide on $35 billion in pretax U.S. profits.

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