Month: February 2016

Greetings! Thanks for reading the Tax Justice Digest. In the Digest we recap the latest reports, posts, and analyses from Citizens for Tax Justice and the Institute on Taxation and Economic Policy.

We begin with some sad news. This week we said goodbye to Rebecca Wilkins, CTJ’s former legal counsel, who died after a four-year battle with cancer. Rebecca was immensely talented. Here’s our remembrance.

Ten Corporations Would Save $97 Billion in Taxes Under “Transition Tax”
President Obama’s budget proposal includes a one-time “transition tax” on the offshore profits of all U.S.-based multinational corporations. His plan would tax these profits at a 14 percent rate immediately, rather than at the 35 percent rate that should apply. This amounts to a huge tax cut bonanza at the expense of American taxpayers. Read CTJ’s full report here.

Sign up for Our New Resource: Corporate Tax Watch
Many of our readers are especially interested in taxes paid (or not) by corporations. To feed your need for more corporate tax information we are launching Corporate Tax Watch – sign up for the emails here. Sign up and you’ll receive occasional updates about corporate taxes delivered right to your inbox.

Speaking of Corporate Tax Watch… This week ITEP’s Director Matt Gardner took a close look at Carrier Corporation and its parent, United Technologies. The company is drawing the well-deserved ire of presidential candidate Donald Trump and Indiana Governor Mike Pence after announcing that Carrier will move 2,100 jobs from Indiana to Mexico next year. Gov.  Pence reportedly is assigning part of the blame for Carrier’s move to our nation’s “high federal corporate tax rates.” Read Matt’s blog post here debunking that claim.

2016 State Tax Policy Trends: Nine States Seriously Considering Gas Tax Increases
This week ITEP’s research director, Carl Davis, reports that nine states (Alabama, Alaska, California, Hawaii, Indiana, Mississippi, Missouri, New Jersey, and South Carolina) are considering raising their gas taxes. Raising the gas tax in a responsible way that simultaneously offers low income tax relief is a good thing. However, Carl warns that “too many of these long-overdue gas tax updates are only being considered on the condition that they are coupled with an equal, or larger, cut in other taxes.” Read his full post. Also, here’s an interesting piece in USA Today that cites Carl and offers grim news about the state of our nation’s bridges.

Oklahoma Facing Showdown Over Income Tax Cuts?
Oklahoma has become yet another regrettable example of what happens when state policy is driven by income tax cuts. For more on the drama in OK, check out our post here.

Tax Policy Issues with Legalized Retail Marijuana
ITEP’s Carl Davis gave testimony before the Vermont Senate Committee on Finance about the tax issues surrounding taxing marijuana. Among Carl’s recommendations, “Vermont lawmakers should take care not to allow the state’s finances to become overly dependent on marijuana.” Read the full testimony here.

State Rundown: Cuts and Crises
For the latest on important state tax policy debates, check out this week’s State Rundown.  
Here’s a sneak peek of this week’s edition: Despite their revenue shortfall, lawmakers in West Virginia are moving forward with their corporate tax cuts. North Carolina lawmakers are once again talking tax cuts. Pennsylvania lawmakers are barely talking – after legislative leaders declared Gov. Wolf’s budget bill DOA. Louisiana Gov. Edwards is threatening that if his state doesn’t balance its budget the end of college football is near.

Shareable Tax Analysis:

Heads Up: Next week, ITEP will be releasing an update of our 2015 report, Undocumented Immigrants’ State and Local Tax Contributions. The report details the current state and local taxes paid by undocumented immigrants and shows how much more they would pay under the administration’s 2012 and 2014 executive actions as well as under comprehensive immigration reform. The updated report will be available here on Wednesday.

Enjoy your Friday and the weekend!  Don’t hesitate to send me feedback at:  kelly@itep.org

To sign up to receive the Tax Justice Digest in your very own inbox click here.

For frequent updates find us on Twitter (CTJ/ITEP), Facebook (CTJ/ITEP), and at the Tax Justice blog.

Sign up to receive our occasional Corporate Tax Watch emails here. 

PG&E: Eight Straight No-Tax Years (And Counting)

California-based Pacific Gas and Electric (PG&E) continues its tax-avoidance hot streak. The company’s 2015 annual report shows that PG&E enjoyed $861 million in profits in 2015. Far from paying federal income taxes on this impressive haul, the company actually got a rebate of $89 million from the feds. This marks a remarkable eight straight years in which PG&E has completely zeroed out its federal income tax bill. Their untaxed profits during this period were over $10.8 billion.  As with many big utilities, accelerated depreciation tax breaks explain most of PG&E’s tax reductions.

There’s Manufacturing, and then There’s “Manufacturing.”

Since Congress passed a special lower tax rate for manufacturing income in 2004, corporate lobbyists and accountants have gradually widened the scope of what counts for “manufacturing” for tax purposes. What was originally envisioned as a strategy to save the rust belt now looks like it was designed to save Hollywood: Discovery Communications has cut its taxes by $99 million over the last two years using the manufacturing tax break, presumably for developing new shows for its “Animal Planet” and “Oprah Winfrey Network.” Walt Disney raked in $290 million in tax cuts from its movie-related “manufacturing” activities last year, and even World Wrestling Entertainment’s new 10-K shows them benefiting, for the third straight year, from the manufacturing deduction.

Owens Corning Continues to Offshore Profits to Tax Havens

Ohio-based Owens Corning continues to shift its profits offshore into low-rate jurisdictions. At the end of 2015, the company reported a total of $1.6 billion in “permanently reinvested” offshore profits, and estimates that it would pay over 35 percent in U.S. taxes if these profits were repatriated. Since the U.S. income tax on repatriated profits is 35 percent minus any foreign taxes already paid, this amounts to an admission the company is stashing its offshore profits in a zero-rate tax haven—possibly in one of its two Cayman Islands subsidiaries. 

Indiana-based Carrier Corporation and its parent, United Technologies (UTX), are drawing the well-deserved ire of presidential candidate Donald Trump after announcing that Carrier will move 2,100 jobs from Indiana to Mexico next year. Indiana Governor Mike Pence reportedly is assigning part of the blame for Carrier’s move to our nation’s “high federal corporate tax rates.”

But a quick look at United Technologies’ taxpayer profile suggests that the company is already quite adept at avoiding federal income taxes. Over the past fifteen years, the company has enjoyed $38 billion in U.S. pretax income and has paid a federal tax rate averaging just 10.3 percent during that period—which means that the company is consistently finding ways to shelter more than two-thirds of its U.S. profits from federal taxes. 

Indiana Senator Joe Donnelley and Governor Pence are sensibly upset that Carrier raked in federal and state tax incentives for job creation before announcing this move. And United Technologies has benefitted, big-time, from the largesse of the federal government in the past: the company was the seventh largest federal contractor in 2014, enjoying almost $6 billion of federal contracts in that year alone. Even more troubling to Governor Pence should be the fact that last year, the company didn’t pay even a dime of state income taxes on its $2.7 billion in U.S. profits.

If this move seems profoundly unpatriotic, it shouldn’t be surprising: United Technologies has been more aggressive than almost all other Fortune 500 corporations in shifting its profits, on paper, into foreign jurisdictions. The company now claims to hold a staggering $29 billion of its profits abroad—that’s one out of every three dollars the company has earned over the past fifteen years. The company’s limited financial disclosures make it impossible to know how precisely much of these profits have been assigned to UTX’s tax haven subsidiaries in the Cayman Islands, Luxembourg, or Gibraltar—or whether the company has paid any tax on these offshore profits.

If Carrier and UTX go ahead with their plans to shift thousands of jobs to Mexico, the local economic effect on Hoosiers will be potentially devastating. But the company’s long history of avoiding federal and state income taxes makes it clear that this move wouldn’t be driven by our tax laws.

Oklahoma has become yet another regrettable example of what happens when state policy is driven by income tax cuts. Worse, Gov. Mary Fallin and Senate Finance Chairman Mike Mazzei are on a collision course over the fate of a recent income tax cut, raising the specter of a prolonged budget deadlock.

Oklahoma is in the midst of a serious revenue crisis, and it has been since the onset of the Great Recession in 2009.  Just last week, lawmakers learned that the state’s projected $900 million revenue shortfall for fiscal year 2017 has ballooned to at least $1.3 billion due to declining oil prices and ill-advised tax cuts. The budget problem is at such crisis levels that the state can’t simply cut even more services to bring the budget into balance. It must raise revenue.

It’s important to note that Oklahoma lawmakers have slashed income taxes repeatedly since 2004. Today, the income tax brings in $1 billion less annually — more than enough to cover the projected revenue shortfall. The protracted crisis caused by ill-advised tax cuts has meant pain for the state’s children and families. According to a report by the Oklahoma Policy Institute, “acute teacher shortages, college tuition and fee hikes, critically understaffed correctional facilities, longer waiting lists for services, and lower reimbursement rates for medical and social service providers are among the harmful consequences of chronic budget shortfalls.” Lawmakers have already declared a revenue failure and cut allocations to state agencies by 3 percent across the board. Since 2009, some state agencies have seen their support from the state cut by as much as a third. Without action, state agencies could see a further 13.5 percent cut, with education among the hardest hit priorities.

Gov. Mary Fallin has at least recognized that the state’s woes need a revenue solution rather than a “cuts only” approach. Sadly, her proposed tax plan would balance the state’s budget problems on the backs of Oklahomans who can least afford it, rather than ask well-off citizens to pay their fair share.

In fact, leaders in the state allowed a $147 million income tax cut to go into effect last month despite the precarious budget situation. Gov. Fallin declared that reversing these tax cuts is off the table. She says “Giving the middle class and the poor a tax break is a smart thing to do, letting them keep more of their hard-earned money” – despite the fact that the top-rate tax cut would save middle income earners just $35 a year.

Instead, Fallin has borrowed a page from Kansas Gov. Sam Brownback’s playbook — suggesting a solution of budget cuts and regressive tax increases.  The governor would expand the sales tax and increasing the excise tax on cigarettes by $1.50 per pack, two measures that would fall more heavily on low-income Oklahomans. Expanding the sales tax to include services and items delivered electronically, like music downloads, would raise $200 million. The cigarette tax increase would raise $181.6 million. Other than a proposal to eliminate a truly nonsensical income tax deduction, her plan mostly ignores income tax options.  Gov. Fallin would still have to cut appropriations to most agencies by 6 percent. Someone should tell her how this policy is working in Kansas City.

The governor has gotten pushback from her own party for defending income tax cuts during a budget crisis. Sen. Mike Mazzei, who chairs the Senate Finance Committee and is serving his last legislative term due to term limits, appealed to the public for help in stopping the cuts. Last week, the senator told businesspeople in Tulsa that the revenue levels required to trigger the most recent cuts were never met, and that the state simply can’t afford them. “If you really want us to have financial reform…we need you to email your Oklahoma state senator…. We need you to email your Oklahoma state representative and give them the support they need to reform our state financial system,” he implored.

Yet a Senate Finance Committee bill championed by Mazzei would also “suspend the state earned income tax credit, low-income sales-tax relief and the state child-care tax credit,” among others. Suspending these three measures next fiscal year will raise less revenue than suspending the top income tax rate cut over the same period. Coupled with the increases proposed by the governor, these changes would make Oklahoma’s tax system even less fair.

An ITEP analysis of the impact of the proposed EITC, sales tax credit, and child-care related changes found that the lowest income taxpayers in the state would see their taxes go up by close to 1 percent of their incomes paying an average tax hike of more than $100 while upper-income taxpayers would not pay a penny more. 

Oklahoma, like Kansas and other states before it, is a lamentable example of what happens when lawmakers promise constituents that they can slash taxes with abandon without any fallout. After years of doubling down on tax-cutting policies, the state now has to figure out how to raise revenue to stave off deep cuts to necessary services. Unfortunately, like many other states, Oklahoma lawmakers are  asking working families to bear the bulk of the cost of crucial services by primarily looking at regressive taxes that take a greater share of income from low- and middle-income families.

There is a better way. Oklahoma lawmakers should secure the prosperity of all of their residents by reversing some of the revenue-losing income tax cuts enacted in recent years. This would allow the state to fund education, public health and other critical priorities, ultimately leading to economic growth and improvements in workforce quality that truly attract businesses. The regressive solutions proposed by Gov. Fallin and lawmakers are more than a scandal – they’re an outrage. 

The world has lost a great champion for tax justice and a good friend that will be dearly missed. On Sunday, Rebecca Wilkins (former Citizens for Tax Justice legal counsel), passed away after a four-year battle with cancer.

From my first day at Citizens for Tax Justice, I learned that Rebecca was the person to go to when confronted with a really complicated question about an obscure provision of the tax code. Rebecca would not only know the answer right off the top of her head, but was happy to take the extra time to break down the issue into simple understandable terms.

As time went on, I began seeking out Rebecca more and more, not just because of her depth of knowledge, but also because she was a genuinely enjoyable person to work with. Even during the toughest times, Rebecca was the first to make a joke and the last person in the office to let anything get her down.

During the 5 years I had the opportunity to work with her, I was impressed with her depth of knowledge and happy demeanor, and also her unyielding passion for tax justice. There are numerous examples of Rebecca’s fierceness; the one that always sticks out was the time she testified along with a stacked panel of banking industry representatives during a hearing of the House Financial Services subcommittee. She stood up as the lone voice for a rule requiring American banks to report interest payments made to foreign account holders. Her fellow panelists tried everything they could to spin and distract from the unjust reality of their banks’ role in facilitating illicit transactions like tax evasion. Rebecca did not allow them to get away with it and made it clear to anyone watching that the rule was both morally right and an absolutely necessity.

Rebecca’s tenacity, intellect and pleasantness made her a real force for change in the tax policy world. Her work brought to light a whole host of injustices in the tax code. This is especially true of her work to elucidate the workings of the world of tax havens, which have proven uniquely powerful and have helped create real ongoing positive change. Rebecca will be sorely missed, but her work will continue to be an indispensable part of everything that we do in the fight for tax justice going forward.

Thanks for reading the Rundown. Here’s a sneak peek: Despite a revenue shortfall, lawmakers in West Virginia are moving forward with their corporate tax cuts. North Carolina lawmakers are once again talking tax cuts, Pennsylvania lawmakers are barely talking – after legislative leaders declared Gov. Wolf’s budget bill DOA. Louisiana Gov. Edwards is threatening that if his state doesn’t balance its budget the end of college football is near.  Thanks for reading.

— Meg Wiehe, ITEP’s State Tax Policy Director

North Carolina lawmakers are looking at cutting income taxes – again. This time, a House committee considered a proposal to increase the standard deduction for the second time since last year. Joint filers would see an increase of $2,000, while individuals would get an increase of $1,000. If enacted, the change would mean an additional 70,000 to 75,000 filers would owe no income tax since their income would be below the standard deduction. State revenues would decline by $195 million to $205 million annually. An editorial in The News & Observer makes the case that lawmakers should restore the state’s Earned Income Tax Credit (EITC) rather than raise the standard deduction. The EITC is better targeted to those families hit hardest by regressive sales, excise, and property taxes, and it would be less costly than increasing the standard deduction, as has been pointed out by our friends at the North Carolina Justice Center.  An ITEP analysis found that the bottom 40 percent of taxpayers in the Tarheel state would receive just 28 percent of the tax cut from a change to the standard deduction, but would see more than 87 percent of the cut from reenacting a state refundable EITC.

Pennsylvania legislative leaders declared Gov. Tom Wolf’s budget dead on arrival last week after the governor unveiled his plan in a speech to the legislature. Pennsylvania has not had a budget since July 2015; negotiations between legislators and the governor have broken down multiple times over the past few months. Wolf’s budget address was a fiery rebuke to lawmakers with dire predictions of chaos for state workers and services if a deal is not reached soon. Wolf’s proposed $33.3 billion budget includes $2.7 billion in new revenue. Under his plan, the state’s flat income tax rate would increase from 3.07 to 3.4 percent, and the sales tax base would be expanded to include basic cable television, movie tickets and digital downloads. The governor would also levy a new 6.5 percent severance tax on natural gas extraction, increase the cigarette excise tax by $1 per pack, and raise taxes on other tobacco products.

Despite a major budget shortfall, West Virginia lawmakers are moving forward with a corporate tax giveaway to coal and natural gas companies. Senate Bill 419 would repeal two severance tax increases first implemented in 2005 to pay off the state’s workers compensation debts. One tax is a 56-cents-per-ton levy on coal producers while the other is a 4.7-cents-per-thousand cubic feet tax on gas producers. Together, the two taxes brought in $122 million in revenue during fiscal year 2015. If repealed, the state will lose $110 million next fiscal year. The Senate Finance Committee unanimously approved the tax cuts by voice vote, “in a committee room largely empty save for members of the governor’s staff and coal and gas lobbyists.” The state will finish the current fiscal year $353 million in debt.

Louisiana Gov. John Bel Edwards warned legislators that the continuing revenue shortfall could spell disaster for college athletics. In his state of the state address, Edwards told Louisianans that they could “say farewell to college football” since Louisiana State University is set to run out of money by April 30. Louisiana faces a $2 billion budget shortfall next fiscal year and needs to come up with $850 million to make it through the current fiscal year. Lawmakers have railed against the governor’s proposal to increase sales and alcohol and cigarette excise taxes, but the dire situation leaves them with few options.

If you like what you are seeing in the Rundown (or even if you don’t) please send any feedback or tips for future posts to Sebastian Johnson at sdpjohnson@itep.org. Click here to sign up to receive the Rundown in via email.  

This is the sixth and final installment of our series on 2016 state tax trends.

Boosting funding for transportation infrastructure—especially with gas tax increases—has been one of the most pronounced trends in state fiscal policy throughout the last three years.  With most state legislative sessions now underway, all signs point to that trend continuing this year.  There are at least nine states where gas tax increases will receive serious consideration in 2016, and a few additional states where a gas tax debate appears likely in 2017.

Most of the gas tax increases under discussion right now would help restore at least some of the purchasing power they lost while being frozen in time for as long as 20 years or more.  But too many of these long-overdue gas tax updates are only being considered on the condition that they are coupled with an equal, or larger, cut in other taxes.  Since those other taxes tend to fund services such as education and health care, these “tax shift” efforts have more to do with reshuffling state investments than with enhancing them.

That being said, some amount of tax cutting alongside a gas tax increase can be justified.  Lower- and moderate-income families are less able to afford a higher gas tax, so there is good reason to consider pairing gas tax increases with a targeted tax cut specifically for those families.  Unfortunately, however, most of the tax cut proposals being considered alongside gas tax increases (such as estate tax cuts in New Jersey and income tax cuts in Indiana and South Carolina) are not at all targeted to taxpayers of modest means.

Nonetheless, the gas tax debate marches on.  The nine states where gas tax debates are already underway this year are:

1. Alabama: Almost 24 years have passed since Alabama last raised its gas tax.  Gov. Robert Bentley is supportive of efforts to update the tax this year, though he has not identified what level of increase he would support and has also not shown an interest in leading the charge on this issue.  A legislative committee holding hearings on the idea heard suggestions for an increase as large as 12 cents per gallon, and the chair of the legislature’s Joint Transportation Committee says there is a 70 percent chance that a gas tax hike could be enacted.

2. Alaska: The falling price of oil has decimated Alaska’s public revenues, and Gov. Bill Walker has proposed a package of tax increases to help close the yawning budget gap.  Among Walker’s proposed changes is an increase to the state’s lowest-in-the-nation gas tax rate from 8 cents to 16 cents per gallon.  No state has gone longer than Alaska without adjusting its basic gas tax rate (though it did add a small fee to gasoline last year), so there is a strong case to be made for updating the tax.

3. California: In his most recent budget proposal, Gov. Jerry Brown reiterated his support for a 6 cent per gallon increase in the state’s gasoline tax and an 11 cent increase in the diesel tax.  Since California’s gas tax rate is tied to the price of fuel, its transportation revenues have been dramatically reduced by falling gas prices.  While the fate of Brown’s proposal is far from certain, it did receive a high-profile endorsement from the Los Angeles Times and reportedly has some degree of bipartisan support in the legislature.

4. Hawaii: Gov. David Ige has proposed increasing Hawaii’s gasoline excise tax rate by 3 cents per gallon in order to generate additional funding for roads and other forms of transportation.  Vehicle registration fees and taxes based on vehicle weight would also rise if Ige’s bill becomes law.

5. Indiana: Legislation passed by the Indiana House of Representatives would raise the state’s gas tax by 4 cents per gallon and allow the rate to grow alongside inflation in the years ahead.  The bill faces an uphill battle, however, as Gov. Mike Pence is opposed to raising the gas tax and both he and the state Senate would prefer a short-term fix relying on general revenues.  In an attempt to gain the governor’s support, Indiana House members attached a gradual cut in the personal income tax to their gas tax bill.  An ITEP analysis of the package (which also includes a cigarette tax increase) showed that most taxpayers would see their overall tax bill rise under this swap.  At the same time, upper-income residents would receive a net tax cut and would benefit from the infrastructure enhancements funded by their less fortunate neighbors.

6. Mississippi: Business groups in Mississippi would like to see lawmakers enact the state’s first gas tax increase in 27 years, and Gov. Phil Bryant is supportive of that effort if it is accompanied by equally large tax cuts.  Bryant said that cutting the state’s corporate franchise tax could be one way to accomplishing that goal, though it may not be his preferred route.  According to the governor, “This tax cut does not need to apply to large corporations. They are and have been receiving the reduction in fuel cost for some time now. It is the working families of Mississippi I am concerned about.”  Notably, however, the chair of the Mississippi House Appropriations Committee is unenthusiastic about the idea of cutting general fund taxes in order to justify an increase in the gas tax, explaining that going that route means “you’ve paid for roads at the expense of the general fund.”

7. Missouri: Limits in Missouri’s constitution make it difficult to enact more than $90 million in tax increases in a given year—so Gov. Jay Nixon and some state legislators have thrown their support behind an $85 million plan that would raise gas taxes by 1.5 cents and diesel taxes by 3.5 cents per gallon.  While the proposal has received the backing of at least one Senate committee, House Speaker Todd Richardson would prefer to redirect other state funds toward infrastructure.  More specifically, the St. Louis Post-Dispatch explains that the Missouri Legislature is considering taking money it saved by slashing programs for the poor, especially poor children, and devoting it to highways.”

8. New Jersey: Before suspending his presidential campaign, Gov. Chris Christie told a New Hampshire audience that “I’m not going to increase the gas tax” in New Jersey.  Legislators in the state, however, are not so sure.  In the past, Christie has appeared amenable to a gas tax increase as long as it is paired with cuts in other taxes.  Assembly Speaker Vincent Prieto, who supports a gas tax hike, said that he takes Christie’s comments “with a grain of salt … He does know that we are running out of money.”  Unfortunately, the tax cut options that appear to be on the table are not at all well-suited to offset the regressive impact of a gasoline tax increase.  Estate tax cuts and an expanded income tax break for taxpayers with significant pension income are the most frequently discussed tax cut options.

9. South Carolina: Lawmakers in South Carolina are considering a package of tax changes that includes a gas tax increase of 12 cents per gallon (the first such increase in 27 years) and a hike in vehicle registration fees.  Gov. Nikki Haley has insisted that any increase in transportation taxes be accompanied by an equal, or larger, decrease in general fund taxes.  Some of the tax cuts under consideration—such as an Earned Income Tax Credit—could help offset the disproportionate impact that gas taxes have on low-income families.  Others, like a reduction in personal income tax rates, would primarily benefit high-income taxpayers (as our analysis of the governor’s 2015 proposal showed).

To be sure, these are hardly the only states where infrastructure funding and the gas tax have been topics of discussion.  Oregon and Tennessee have each given serious consideration to gas tax increases, though lawmakers in both states have opted to delay a fuller debate until 2017.  In Minnesota, Gov. Mark Dayton and the state Senate have proposed adding a price-based tax on gasoline, but the House is staunchly opposed and the Governor has since backed away from the idea, at least for the time being.  In Louisiana, Gov. John Bel Edwards has yet to put forward a formal transportation funding plan, but so far he appears to be keeping a variety of revenue options on the table—including a gas tax increase included in his transition committee’s “menu” of revenue-raising options.  In Colorado, calls to raise the gas tax (last updated over 25 years ago) seem to have become more common in recent months, though a lack of leadership from either the Governor or key legislators on this issue suggests that it is unlikely to gain traction this year.  And in Arkansas, a funding task force and the state’s trucking industry have floated a gas tax hike as a potential infrastructure funding option, but Gov. Asa Hutchinson’s adamant opposition makes passage this year unlikely.  Instead, Hutchinson wants to move funding away from education, health care, and other general services in order to spend it on highways instead.

Ultimately, there is good reason to expect that at least a few states will take action to boost funding for their transportation infrastructure in 2016.  Whether those efforts will constitute a step forward, or back, for each state is yet to be determined.  The gas tax increases being discussed in states such as Alabama, Alaska, and elsewhere are long overdue.  But the types of “tax shifts” being debated in Indiana and New Jersey, for example, could actually reduce the fairness and long-run sustainability of those states’ tax codes.

Read the Tax Justice Digest for recent reports, posts, and analyses from Citizens for Tax Justice and the Institute on Taxation and Economic Policy.

Here’s our weekly wrap up of tax debates:

Tax Foundation Revives Voodoo Economics
Carl Davis, ITEP’s Research Director, takes a close look at the Tax Foundation’s TAG (Taxes and Growth) model and concludes that it “takes an exaggerated view of the impact that taxes have on the economy.” For more on the flaws of the TAG model read the full paper here.

Our Take On President Obama’s Last Budget
This week President Obama released his budget, which contains $3.2 trillion in tax increases over the next ten years, most of which would fall on corporations and wealthy taxpayers. But the President also lets corporations with lots of offshore income off the hook with a proposed “transition tax.” The transitional tax would actually give $97 billion in tax cuts to just ten of our country’s biggest tax avoiders. Click here for more on the President’s budget. 

Carl Davis, ITEP’s Research Director, took a close look at the President’s proposed oil tax that would add an additional $10.25 to the price of a barrel of crude oil. Read more about it here.  

Corporate Tax Watch: Celanese Corporation
Celanese is a Fortune 500 company that makes engineering polymers (go ahead and Google that – we weren’t sure what they are either). Come to find out, these polymers are critical components used in a variety of industries: agriculture, pharmaceutical, aerospace, and even the automotive industry. Despite what we don’t know about engineering polymers, we do know that the company generates 30 percent of its profits from just four small tax haven companies. Click here for more on Celanese and its use of tax havens.

Bernie’s Tax Plan
CTJ staff analyzed the Sanders health care tax plan and found that his proposal would raise $13 trillion and yet increase after-tax incomes for all income groups except the very highest. Read CTJ’s full report on the plan (PDF). Don’t have time to read the full report? Here’s the CliffsNotes version.

Internet Tax Ban is a Defeat for Good Tax Policy
Congress just passed a permanent ban on taxing internet access. Here’s our take on why this ban is wrongheaded.

2016 State Tax Policy Trends:
Shifty Tax Proposals
This week ITEP Senior Analyst Lisa Christensen Gee took a careful look at the many states that are debating whether to reduce one tax to pay for increasing another tax. Tax shift proposals in Arizona, Mississippi, Indiana, Georgia, New Jersey and South Carolina are highlighted in this piece.

Addressing Poverty and Inequality Through Tax Breaks for Working Families 
ITEP Senior Analyst Aidan Russell Davis examines low-income tax credit debates in states across the country. We know that low-income credits are a vital tool for keeping low income families above the poverty line. Click here for more on how states are enhancing and protecting their Earned Income Tax Credit (EITC) – and check out our updated policy brief on EITCs here.

Shareable Tax Analysis:

ICYMI: This week our State Rundown focused on states with shortfalls specifically: Arizona, Kansas, Kentucky and Louisiana. To get a copy of the Rundown in your mail box sign up here. 

What a full week! Have a super weekend. Don’t hesitate to send me feedback at:  kelly@itep.org

Sign up to receive the Tax Justice Digest in your very own inbox.

Sign up to receive our occasional Corporate Tax Watch emails here. 

February is a special time of the year for corporate tax watchdogs: it’s when hundreds of Fortune 500 corporations release their annual financial reports to shareholders, including potentially embarrassing details about their relationship with the U.S. tax system.

CTJ and ITEP’s corporate tax analysts will be knee deep in these reports for much of the next month, but will come up for air every now and then to give quick updates on their findings. Here’s a first take on what we’re seeing so far.

Perfecting the art of long-term tax dodging

A February 2014 CTJ/ITEP report highlighted 26 profitable corporations that paid no current federal income taxes over the five years between 2008 and 2012. The Michigan-based utility CMS Energy this week confirmed that its inclusion in this list was no accident: in the three fiscal years since CTJ’s original report, CMS has enjoyed $2.2 billion in U.S. profits—and hasn’t paid a dime in federal income taxes over this period. For those needing a scorecard, this means over the past eight years CMS has paid no federal income taxes on $4.6 billion in profits. Like many other big utilities, CMS appears to be relying on generous tax breaks for accelerated depreciation. With the resurrection of expired “bonus depreciation” measures in the December 2015 “extenders” package, the good times will likely continue to roll for CMS going forward.

Sending customers and profits all over the world

Washington-based Expedia is no stranger to arranging worldwide travel—and a side benefit appears to be that the company is adept at sending its own profits to exotic foreign climates. The company’s newest annual report discloses that Expedia is now declaring $1.5 billion of its profits to be “permanently reinvested” in undisclosed foreign nations. Taking advantage of a toothless provision in the Securities and Exchange Commission’s rules on corporate tax disclosure, the company refuses to divulge whether even a dime of income tax has been paid to foreign nations on these profits—but if their six Cayman Islands subsidiaries are any indication, a big chunk of these offshore profits may be enjoying the same beachfront view Expedia routinely provides its clients.

Changing the way we view television and avoiding tax at home and abroad

Not all corporations are as evasive about their offshore profits as Expedia: the Netflix corporation remains as open about their foreign and domestic tax avoidance as ever in its latest annual report. The company discloses that if it repatriated $65 million stashed offshore, it would face a tax bill of just a hair under 35 percent—which means that wherever its foreign profits are located, it’s someplace that levies about a zero percent tax rate. Domestically, the company is likely not too worried about that 35 percent rate since in 2015 it was able to use just one tax break, an unwarranted giveaway for executive stock options, to zero out all federal income taxes on its $95 million in U.S. profits.