Author: tarek

FATCA, the Foreign Account Tax Compliance Act, finally became effective last week. The Treasury Department had repeatedly delayed implementation of the legislation which was enacted in 2010. Beginning July 1, payments made to foreign banks who don’t comply are subject to a 30 percent withholding tax.

FATCA requires foreign banks and foreign branches of U.S. banks to file information returns with the IRS disclosing the accounts of U.S. citizens and residents. Rather than report to the IRS directly, many countries have signed agreements to have the banks file the information with their home governments which will then share it with the IRS.

Although FATCA has many critics and some lawmakers have voted to repeal it, the global community has lined up to comply with the law. Over 77,000 banks and 80 countries, even China and Russia, have registered and many countries are considering enacting similar laws. Someday soon, having a Swiss bank account will no longer suggest mystery and intrigue—or tax evasion.

AAA estimates that 41 million Americans will travel for the July 4 holiday, including 34.8 million who will travel by car — the highest numbers since before the recession put a damper on holiday travel. Those travelers stuck in traffic bottlenecks may wonder why our government — you know, the one we fought the Revolution to have — can’t provide something as basic as roads and bridges that meet our needs. Infrastructure experts are also wondering that, and in fact, the American Society of Civil Engineers has given the U.S. infrastructure a D+. Now things are about to get worse because, once again, some lawmakers refuse to raise revenue to pay for anything.

Most federal funding for highways comes from the federal Highway Trust Fund, which will face a shortfall starting in August because Congress has not adjusted the 18.4 cent per-gallon gas tax and 24.4 cent per-gallon diesel tax, which are not indexed for inflation, since 1993. The fact that they have not been increased to keep up with the rising costs of construction or adjusted to account for reduced fuel consumption now means that these taxes no longer raise enough money to fund our infrastructure needs.

The straightforward solution would be to raise the fuel taxes, a reform that ITEP has called for before. As usual, many lawmakers oppose this simply because they oppose any and all tax increases even to fund something as basic and popularly supported as highways. Some lawmakers have turned to gimmicks that do not actually raise revenue, which CTJ has criticized.

If lawmakers cannot bring themselves to provide the most obvious solution, an increase in fuel taxes, a second best solution would be to raise revenue by closing corporate tax loopholes. It would be impossible for corporations to profit if the U.S. did not have the roads, bridges and other infrastructure that makes commerce possible, so it’s only reasonable that they pay some taxes to support the federal government and it’s reasonable for Congress to close loopholes allowing corporations to shirk that duty.

Two proposals introduced in Congress recently would raise $19.5 billion for the Highway Trust Fund by closing the loopholes that allow corporations to “invert.” In an inversion, an American corporation reincorporates itself abroad and claims to be a foreign company that is mostly not subject to U.S. taxes even if it is still managed from the U.S. and conducts most of its business in the U.S. There are many more corporate tax loopholes that must be closed, and much more Congress needs to do to provide adequate infrastructure funding. But it certainly makes sense to start by stopping the worst corporate citizens from avoiding taxes. 

The existing tax rules prevent an American corporation from simply reincorporating itself in a tax haven and declaring itself “foreign.” But a loophole allows inversions to take place when an American corporation merges with a smaller foreign corporation, even if the management and most of the business of the newly merged company stays in the U.S. In theory, the profits that any corporation (even a “foreign” corporation) earns in the U.S. are taxable in the U.S., but inversions are often followed by earnings stripping, which makes U.S. profits appear to be earned offshore where they won’t be taxed.

A proposal to close this loophole was first put forward as part of President Obama’s most recent budget plan and was introduced in Congress following the recent news of Walgreens, Pfizer and eventually Medtronic all pursuing inversions over the last several months.

Voters in 36 states will be choosing governors this November. Over the next several months, the Tax Justice Digest will be highlighting 2014 gubernatorial races where taxes are proving to be a key issue. Today’s post is about the race for Governor in Arkansas.

No matter who wins the governor’s race in November, income tax cuts are coming to Arkansas. The state finds itself in a unique position this year – because of a law imposing term limits on the governorship, neither of the 2014 gubernatorial candidates is an incumbent, yet both are attempting to fashion themselves in the image of current Democratic Governor Mike Beebe as they push long-term income tax overhauls.

Back in 2006, then-candidate Beebe made slashing the state’s historically unpopular sales tax on groceries the cornerstone of his campaign, a promise he kept as governor as he gradually reduced the rate over the course of his 8-year term from 6% to 1.5%. Beebe was commended both at home and in national policy circles for successfully implementing a common-sense tax cut which lessened the regressivity of the sales tax for low-income Arkansans while also minding the health of the state’s revenue stream – not cutting too deeply too quickly.

In the current gubernatorial race, Republican candidate Asa Hutchinson and Democratic candidate Mike Ross have both invoked Beebe’s duly cautious sales tax reduction strategy as a model for their own income tax cut proposals. But the thing is, the income tax is fundamentally different – state sales taxes are known to be highly regressive, but the income tax is a progressive tax that has the potential to increase the overall fairness of state taxes. As always, the cost of reform to the state should be no small consideration in any evaluation of the candidates’ proposals, but just as important is the extent to which broad income tax cuts would be a loss for progressivity in state taxation.

Arkansas’ current income tax brackets were designed back in 1971 and were left unchanged for 26 years until 1997, when the state legislature first began indexing the brackets to inflation, with a 3% cap. But the legislature declined to apply the indexing retroactively, meaning that bracket boundaries have only risen alongside inflation for 17 of their 43 years of existence (a problem exacerbated by recent low levels of inflation). In real terms, then, the dollar value of the state’s current bracket boundaries are stuck in the 1980s, with the top bracket starting at $34,000. This would be fine if prices and incomes were still at 1980 levels, but inflation inevitably does what it does best – inflates – and has pushed many middle-income Arkansans into unjustifiably high tax brackets.

Mike Ross has proposed a relatively simple, measured hike in the bracket thresholds that retains the tax’s original structure. Ross would lower rates across the board by 0.1% (except the top rate, which is already being lowered by the same amount as part of last year’s tax cut package) and retroactively index the tax brackets to inflation for the 26 years prior to 1997. Applying this type of broad reform, with the adjusted top bracket starting at a more reasonable $75,100, would certainly target relief toward the low- and middle-income taxpayers most affected by inflationary tax hikes under the current structure, but it would also afford unnecessary benefits to the higher end of the income ladder.

Critics have taken issue with the fact that Ross’s timetable for implementation is indeterminate, with the candidate saying only that he will “implement [the proposal] in a gradual, fiscally responsible way — as the state can afford it.” The plan also comes with a $575 million price tag, as projected by the Arkansas Department of Finance and Administration (DFA), once it is fully phased in.

Hutchinson is pushing a more rapid timetable for his own income tax cut plan, which has some worried about unmanageable revenue impacts. The candidate is proposing immediate first-year rate cuts – namely, lowering the rate for those in the $20,400-$33,999 bracket from 6% to 5%, and from 7% to 6% for those earning $34,000 to $75,000. The phased-in portion comes via the implementation of an ill-advised rate cut for those earning more than $75,000 “as surpluses and growth allow.” Extrapolating from Hutchinson’s pledge that no one earning over $75,000 will receive a tax cut under his initial plan, the benefit of the lower rates would likely be phased out over some income range just under $75,000. The plan would target around 500,000 middle-income taxpayers, but would do nothing to lower the taxes paid by the poorest Arkansans – those earning under $20,400.

The campaign estimates the first-year cost at $100 million (the major caveat here is that the cost for the Hutchinson plan cannot be compared to the cost of the Ross plan and should not be taken as an official estimate because the Hutchinson campaign has refused to release plan details to the DFA to model). Hutchinson intends to use surplus funds to cover the cost of the cuts in 2015 and is counting on state revenue growth in future years – a tenuous strategy given the eventual $140 million per year cost of last year’s tax cut package that will be competing for new revenues.

With the price of both plans likely to be a major factor, Hutchinson’s plan at least appears to be preferable in terms of fairness, with high-income taxpayers seeing no cut. But unfortunately, the plan is a red herring. The candidate has made no bones about his end goal – the total elimination of the income tax in Arkansas. Such a move would wipe out a major piece of the state’s tax base and take away the only meaningful mechanism for reducing regressivity, and that outcome has far greater implications for both fiscal health and fairness than Ross’s across-the-board cuts.

By now, the familiar media narrative about the nation’s capitol is one of glittering condos, staggering inequality, and the fraught race relations between newcomers and older residents. The trope shapes the coverage of everything from sports to politics, education to public transportation. When it comes to our nation’s capital, every reporter is Charles Dickens.

And so it was last week, when the DC City Council passed an ambitious tax reform package. “D.C. Council votes to keep ‘yoga tax’ as part of tax-cutting budget deal,” wrote The Washington Post, portraying the deal as an epic showdown between established progressive backbenchers and ritzy health-conscious transplants. (To be fair, The Post’s coverage of the recent tax bill has been far more substantive than reporting from other outlets, which wrote about the yoga tax controversy without providing context.)

The story most people missed? Washington, D.C. managed to pass a mostly sensible and progressive tax cut package that will deliver the biggest benefits to middle- and low-income residents – and the ‘yoga tax’ is just one small part of a much larger plan. What’s more, the DC City Council largely followed the recommendations of a nonpartisan commission designed to study the issue. 

The council also voted to expand the District’s Earned Income Tax Credit (EITC) for childless workers. Working low-income taxpayers who qualify for the federal credit will receive a D.C. credit worth 100 percent of the federal benefit (increased from 40 percent of the federal).  But, the policy change actually expands upon the federal program by allowing childless workers to continue receiving the tax credit above and beyond the federal income limits.   The tax cut lowers the income tax rate for those earning $40,000 to $60,000, from 8.5 percent to 7 percent (the rate will go down to 6.5 percent if the city meets revenue targets). The measure also increases the standard deduction and personal exemption to federal levels by 2017, with interim increases going into effect in 2015.

The EITC is one of the most effective anti-poverty programs, and is an economic winner as well: The Center for Budget and Policy Priorities estimated that the EITC put about $128 million into the DC economy in 2011.  Workers receive the tax credit based on their wages. If the credit exceeds the amount of tax a worker owes, then that worker receives the difference as a refund.

Pictured: Hell.

Of course, cutting taxes is easy – paying for tax cuts is the difficult part. Here again, the D.C. proposal shines. Instead of relying on regressive sales tax rate increases that disproportionately hurt the lower and middle classes, as states like Kansas have done in recent years, the District took the route supported by academic research and sound policy: they broadened the sales tax base. The city expanded the sales tax to cover additional services, such as construction contracting, storage units, carwashes, health clubs and tanning salons – yes, including yoga studios. Expanding the sales tax to cover services as well as goods in an increasingly service-based economy makes a lot of sense.

The D.C. Council, known more in recent years for political tawdriness than prudent fiscal management, has made the right move for the city’s residents and the city’s fiscal future. Many of the proposed cuts are tied to future economic growth, and will not take effect if this growth doesn’t materialize.

If there’s something not to like, it’s the Council’s decision to increase the threshold for application of the estate tax from $1 million to $5.25 million (the federal threshold). This proposal will benefit a handful of families and cost the city almost $15 million in lost revenue. Even this proposal, however, is tied to future revenue increases.  Businesses also got a significant cut in rates, from 9.975 to 9.4 percent, with the goal of reaching 8.25 percent by 2019. 

So hats off to the D.C. City Council for proving that tax cuts don’t have to be a giveaway to the rich, and that tax reform doesn’t have to soak the poor. Other jurisdictions should follow their lead.

Following up on their efforts to enact dramatic cuts to the IRS’s funding last year, Republican members of the House Appropriations Subcommittee on Financial Services voted to slash IRS funding by $341 million, pushing the agency’s budget to its lowest level in more than five years. What makes these proposed spending cuts so ridiculous is that every dollar invested in the IRS’s enforcement, modernization and management system reduces the federal budget deficit by $200 and every dollar the IRS “spends for audits, liens and seizing property from tax cheats” garners ten dollars back.

From fiscal year 2010 to 2014, the IRS has seen its overall funding cut by as much as 14 percent (adjusting for inflation) and its staff cut by 11 percent. Making matters worse, these cuts come even as the IRS takes on increasing numbers of tax returns and the substantial new responsibilities of enforcing the Foreign Account Tax Compliance Act (FATCA) and the tax subsidies in the Affordable Care Act (ACA).

Because the IRS’s job is to collect taxes that pay for the rest of the government, it is unique in that cuts to its budget have the effect of substantially increasing the deficit. In fact, the Treasury Inspector General for Tax Administration (TIGTA) found that the 14 percent reduction in enforcement personnel from fiscal year (FY) 2010 to 2012 forced by budget cuts resulted in a loss of $7.6 billion in revenue in FY 2012 alone.

A new must-read report by the Center on Budget and Policy Priorities (CBPP) catalogues the variety of ways that this decrease in funding has hamstrung the agency’s ability to do its basic duties. For example, the CBPP notes that budget constraints have contributed to the delays of critical computer infrastructure created to combat identity theft and the filing of fraudulent tax returns. As it stands now, the new system has still not come into place, meaning that victims of identity theft have to wait longer than six months for a resolution to their case.

While the recent IRS scandal is driving many House Republicans to push deeper cuts to the agency, the scandal is really just further evidence that the IRS needs a larger budget to get its job done right. The latest blowup over the IRS’s failure to keep extensive email records, for instance, appears to be driven in part by the fact that the IRS could not afford the $10 million required to increase the capacity of the server where it stores emails. The non-partisan and well-respected National Taxpayer Advocate perfectly explained the fundamental problem with the IRS when she noted in a speech that while “the IRS can improve its policies and procedures,” the recent cuts to the agency are “just plain nuts.”

The Senate for its part has proposed increasing the agency’s budget by $236 million, which is $950 million lower than the increase the Obama administration requested. While this would be a significant step in the right direction, even the administration’s request would not even restore IRS funding to its 2010 level if you take inflation into account. 

New Jersey Governor Chris Christie signed a FY15 budget on Monday after nixing Democratic bills which would have fully funded the state’s promised pension payments through a new “millionaire’s tax.” The effects of the governor’s decision to forgo making the full payments required under his much-lauded 2011 pension reform law are yet to be seen – Standard & Poor’s has threatened to downgrade the state’s debt again while a judge could still reverse Christie’s decision and require the payments to be made.

Indiana Governor Mike Pence pledged to make tax reform a priority during the next legislative session at a conference last week attended by infamous supply siders Arthur Laffer and Grover Norquist, and former Bush administration economic advisor Glenn Hubbard. Pence claims that the tax code must be simplified in order to create a better environment for economic growth, but Indiana House Minority Leader Scott Pelath argues that the language of “simplification” is really just a ruse to disguise the objective of reducing the progressive personal income tax.

Rhode Island and Indiana saw drops in their corporate tax rates Tuesday, a misguided tactic used by states to promote job creation with little proof of success. Rhode Island will drop its rate from 9 to 7 percent, while Indiana’s rate will gradually be reduced to 4.9 percent (this is on top of a gradual reduction from 8.5 to 6.5 percent enacted a few years ago).  However, at least Rhode Island lawmakers sensibly coupled the corporate rate drop with base broadening policies including mandatory combined reporting  which requires a multi-state corporation to add together the profits of all of its subsidiaries, regardless of their location, into one report.

Kansas’s June revenue collections came in $28 million under projections, according to officials. The state ends the fiscal year $338 million short of total projected revenue amid concerns that Governor Brownback’s income tax cut package is causing more bleeding than initially anticipated. Concerned that the state may be spiraling into a budget crisis, House Democratic leader Paul Davis has proposed postponing the next phase of the governor’s tax cuts.

Two years ago, Kansas Gov. Sam Brownback declared that his plan to gradually repeal the state’s income tax would be “a real live experiment” in supply-side economics. He pushed through two consecutive income tax cuts that disproportionately benefited the richest Kansans (while actually hiking taxes on the state’s poorest residents), assuring the public these cuts would pay for themselves.

But the Governor’s experiment now appears to be in meltdown mode: revenues for the last two months have come in way under projections and may leave the state short of the cash needed to pay its bills.

And, while the governor takes credit for cutting taxes at the state level, taxpayers in cities and rural areas are finding themselves paying more in local taxes. The Wichita Eagle cautions that municipalities aren’t even close to being out of the woods yet: “[t]he picture for cities, as well as counties and school districts, could darken over the next year if the state’s revenues don’t better align with projections.”

This tax shift isn’t just happening in Kansas cities. Rural areas are feeling the pinch in terms of increased property taxes. A professor from Wichita State University opined about dramatic property tax increases across the state and concludes “Brownback’s tax experiment is driving these shifts.

Need further evidence of the state’s meltdown mode? Read this superbly titled New York Times piece, “Yes, if You Cut Taxes, You Get Less Tax Revenue, Kansas Tax Cut Leaves Brownback With Less Money.”

Already facing criticism for its plans to become an Irish company to avoid U.S. taxes, Medtronic, the Minnesota-based medical device maker, disclosed this week that it pays very little in taxes in the foreign countries where it claims to have profits.

The company, which made waves recently with its ongoing effort to “invert” its corporate structure so that it becomes (at least on paper) an Irish corporation, doesn’t appear to be facing major obstacles to this effort.

But it’s not taking any chances. Whether the corporate inversion deal ultimately goes through or not, the company continues to aggressively shift profits and cash offshore to avoid U.S. tax. In Medtronic’s just-released annual financial report, the fine print reveals that the company’s total “permanently reinvested” foreign profits—that is, income they have said they have no intention of bringing back to the U.S.—rose from $18.1 to $20.5 billion in the past year. And the total amount of cash and cash equivalents that the company holds abroad rose abruptly from $10.9 to $13.9 billion in just one year.

The tax implications of Medtronic’s offshore cash—to say nothing of the $2 trillion in permanently reinvested earnings held by Fortune 500 companies overall—could be enormous. The company is supposed to pay the 35 percent U.S. tax rate (minus any taxes already paid to foreign nations) on these earnings when they are “repatriated” to the U.S. In its financial statements, the company declined to disclose whether it has paid any tax at all on its permanently reinvested foreign earnings. It hid behind an accounting standards loophole that allows companies to avoid disclosure if calculating the U.S. tax would be “impracticable.” Only 58 of the 301 Fortune 500 companies that have offshore profits estimated the U.S. tax on those earnings in their most recent annual reports.

But in response to a reporter’s inquiry this week, Medtronic admitted that the U.S. tax due on those foreign profits would be 25 to 30 percent.  We’re willing to bet that just like Medtronic the other profit-shifting U.S. multinational companies know exactly how much it will cost to repatriate those earnings, but don’t want to let the public know of their tax-dodging ways.

Medtronic’s 25 to 30 percent estimated U.S. tax liability tells us that a substantial amount of the so-called offshore profits are accumulating tax-free. The company’s 37 subsidiaries located in known tax havens adds to the suspicion: the company has five subsidiaries in the Cayman Islands alone. Unless the company has identified a huge untapped medical-device market in the Caymans, it’s probable that the main reason why Medtronic owns these subsidiaries is to shelter their cash tax-free.

If, as seems likely, Medtronic’s inversion proceeds as planned, its “foreign” earnings in these tax havens may forever escape tax. But the company potentially stands to benefit from shifting profits, on paper, into tax haven countries even if they are not allowed to renounce their Minnesota citizenship.

Some in Congress continue to float the idea of a repatriation “tax holiday” that would allow companies like Medtronic to pay a sharply reduced tax rate on their tax haven profits upon repatriation.

So Medtronic’s ongoing off shoring effort is a profitable tax dodge no matter what happens to their inversion effort. It’s time for Congress to put a stop to it.

With the release of her new book and the 2016 election just around the corner, Hillary Clinton’s wealth and tax rate have been fodder for talking heads the past couple weeks. Both the report on the Clintons estate tax planning and Ms. Clinton’s comments that she pays “ordinary income tax” provide useful lessons on the problems with the way the United States taxes wealthy individuals.

When Avoiding the Estate Tax Becomes the “Standard”

According to an in-depth report in Bloomberg, Bill and Hillary Clinton transferred the ownership of their New York residence into a pair of Qualified Personal Residence Trusts (QPRT), which tax experts believe could allow them to avoid hundreds of thousands of dollars in estate taxes.

The substantial tax benefit that the Clintons generated is driven by two key aspects of the QPRT. Most importantly, placing the residence into the QPRT locks in its current value as part of the estate, so all the future growth in the house’s value will not be taxable as part of the estate. In addition, because the residence ownership is split in half between two QPRTs, the total valuation of both trusts is discounted because partial ownership stakes are considered by the IRS to have a lower value.

In other words, the Clintons are indeed using a tax dodge. They are using a method that, unfortunately, has become “pretty standard” for wealthy individuals and, also unfortunately, is entirely legal under our broken estate tax system.

Unlike wealthy individuals such as Sheldon Adelson, the Clintons have historically supported strengthening the estate tax rather than dismantling it further. During the 2008 campaign for example, Ms. Clinton supported capping the per-person exemption at $3.5 million, which mirrors President Obama’s current proposal to strengthen the estate tax in his most recent budget (PDF).

Noting the Difference between the Tax Treatment Investment and Wage Income

In a much publicized interview with The Guardian, Ms. Clinton noted that she pays “ordinary income tax, unlike a lot of people who are truly well off.” While she certainly opened her mouth and inserted her foot, her adversaries attacks on her poor phrasing misses the point.  A big part of the problem with our tax code is the preferential treatment it gives to income derived from wealth (e.g. capital gains, stock dividends) versus income derived from work. So, indeed, the Clintons are wealthy by any standards. Between 2000 and 2007 had $109 million in adjusted gross income, and they paid a 31 percent tax rate. Their tax rate is more akin to the rate paid by working people because they derive a significant portion of their high annual income from speaking fees, book royalties and other activities that are classified as work.

A wealthy investor, like Mitt Romney and Warren Buffet, with the same income but all of it derived from capital gains and stock dividends would have paid about half the rate the Clintons paid. This preferential treatment helps to perpetuate income inequality.

Hopefully, Mrs. Clinton’s criticism of these low rates is an indication that she favors substantially curtailing or even ending the preferential rate on capital gains. If so, it would mark a positive shift from her position during the 2008 campaign, when she stated that she would not try to raise the top capital gains tax rate above 20 percent (the level it is today). 

All eyes are on Brazil and the World Cup, but Gov. Tarso Genro of Rio Grande do Sul believes the country’s decision to host the World Cup has been “a huge mistake”.

And many of the country’s residents as well as a host of global anti-poverty advocates agree with him. Brazil has been under increasing scrutiny for tax breaks it awarded to the sporting giant FIFA–tax breaks that many believe the country can ill afford given the high concentration of poverty in some of the country’s districts.

According to InspirAction, Christian Aid’s Spanish affiliate, Brazil will give up $530 million in tax revenue to benefit the World Cup’s corporate sponsors such as McDonalds, Budweiser and Johnson & Johnson. The country is allowing corporations to import an array of products from food, medical supplies and promotional materials tax-free, while also exempting seminars, workshops and other cultural activities from taxes.

InspirAction and other advocates have said the millions saved by FIFA and its sponsors through these breaks should be used to benefit the poor, not corporations and their shareholders. Foregone World Cup tax revenue could help lift 37 million people out of extreme poverty and help improve basic services. Instead, FIFA, a supposed non-profit organization, is reporting historic profits while leaving the host country to foot the bill.

The bidding to receive games such as the World Cup or the Olympics is always intense. During the publicity runs surrounding the bidding, potential host countries and the sponsoring organization tout the economic benefits including increased tourism dollars. Unfortunately, economic benefits that arise from the events often are as short-lived as the event itself. The economic burden, however, can be lasting.

In 2010, South Africa hosted the World Cup. FIFA reported that it received $3.8 billion tax-free in revenue and that year was “the most profitable in FIFA history”. However, South Africa had a $3.1 billion net loss from hosting the games. The same year, the number of tourists in South Africa dropped by half compared to previous years. The displacement of usual tourists is a reoccurring event in World Cup-host countries including Germany, China and Korea. Similarly, the European Tours Operations (EOTA) conducted a study in 2006 of countries that hosted the Olympics, which showed tourism declined the year pre and post-Olympics.

Host countries also have the financial burden of maintaining specially built stadiums. German economist Wolfgang Maennig conducted a study which found that the utilization of accommodation actually fell by 11.1 percent in Berlin and 14.3 percent in Munich during the 2006 World Cup. In Brazil’s case, the country spent $300 million in public funds constructing Arena Amazonia, which Brazilian officials portrayed as an investment into the Manaus’ economy and tourism in spite of the research indicating otherwise.  There has been speculation that the 42,000-capacity Arena Amazonia will be turned into a detention centre after the games as sporting events in the small town rarely attract 1,000  people. Neither a huge stadium nor a detention center is likely to boost tourism figures for Manaus, despite what officials are saying.

Mayor of Porto Alegre, Jose Fortunati, defended the corporate tax breaks and said his city would not have been able to take part in the games without them.  This reasoning still doesn’t sit well with much of the Brazilian public. Former Brazilian footballer, manager and now politician with the Brazilian Socialist Party, Romário de Souza Faria, noted that FIFA is projected to make $1.8 billion in profits, which should generate $450 million in tax for public services, but FIFA won’t pay anything.

Hosting the World Cup and other international sporting events surely is a public relations boon. But underneath the games’ hype, there are serious questions about who really benefits—questions that are worth broad public debate.

Two years from now, Brazil is set to do this all over again when it hosts the summer Olympics and offers the same sort of tax breaks to the Olympic Committee. It seems that now is as good a time as any to address these issues.