Tag: TaxJusticeBlog

This week we are bringing you news confirming that Kansas’ years of tax cutting have been heavily tilted toward the rich, more lagging revenues in states including Arkansas, Texas and Minnesota, new problems for New Jersey’s budget, and a major new taxpayer boondoggle in Nevada. Thanks for reading the Rundown!

— Meg Wiehe, ITEP State Policy Director, @megwiehe

• In Kansas, the Brownback tax cuts are under fire on several fronts. Revenue estimates weren’t defective before the tax cuts. The tax numbers are in and it’s confirmed ITEP’s findings that the bulk of Brownback’s cuts helped the wealthy while increasing taxes for those with low-incomes. And new information shows that the governor and majority of lawmakers personally stand to benefit from the tax exemption for business pass-through income.
• Arkansas revenues are down for the third month in a row, but this isn’t stopping Gov. Asa Hutchinson from talking tax cuts. He is expected to release an income tax cut proposal the day after the election. Other lawmakers appear more hesitant in light of unmet revenue expectations.
• Tax collections are also down in Texas and Minnesota the first quarter of fiscal year 2017. As state budgets struggle, local governments are also feeling the pressure due to decreased revenue sharing.
• The Joplin Globe takes a close look at Amendment 4, on which Missouri voters will decide this November. The amendment would constitutionally prevent the state from modernizing its sales tax to include the growing service sector.
• As we wrote last week regarding the tax deal in New Jersey, work can recommence on the state’s infrastructure but much remains to be done to repair and improve its tax code. Moody’s Investors Service shares our concerns, pointing out that the large and regressive tax-cut package passed along with the gas tax fix “will worsen the state’s existing budget challenge.”
• Lawmakers in Pennsylvania aim to rework the state’s gambling tax after a state Supreme Court decision, ruling that the way casinos are taxed for local impact assessments is unconstitutional, drastically cut local aid.
• Lawmakers are in special session in Nevada to decide on whether to subsidize a new stadium for the NFL Raiders. The Senate has approved the measure with more than the required supermajority, despite persistent evidence that it’s a major rip-off for taxpayers.

What We’re Reading…

• A new study reinforces the need for tax policy and other public policy solutions to the vast and widening inequality we face. The report, using previously unavailable data on inequality and social mobility over multiple generations, reaches a disheartening conclusion: “Whatever you thought, it’s worse.” The Washington Post Wonkblog summarizes the findings here.
• Jeffery Sachs also discusses facing up to income inequality in a weekly series.
• The World Health Organization makes the case for taxing sugar sweetened beverages, urging countries to enact the tax to fight obesity and cut health care costs. Meanwhile, big soda is under scrutiny for using corporate philanthropy as a strategy to stop soda tax measures.

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 Meg Wiehe at meg@itep.org. Click here to sign up to receive the Rundown via email.

Perhaps one of the most debated ballot measures this fall is Oregon’s Measure 97. Multiple economic analyses are circulating, millions of dollars are being spent campaigning, rotary clubs and chambers of commerce are discussing, teachers are canvasing, editorial boards and current and former state governors are weighing in, and polls are fluctuating. 

Measure 97 would increase the state’s corporate minimum tax for businesses with annual Oregon sales over $25 million. Under current law, corporations pay the greater of a minimum tax on sales (ranging from $150 to $100,000) or a tax on profits (6.6 percent on profits up to $1 million and 7.6 percent on profits above $1 million). Measure 97 would eliminate the $100,000 cap on the corporate minimum tax and apply a 2.5 percent rate to sales above $25 million.

If passed, Measure 97 could generate $3 billion in new revenue each year—almost a third of the state’s current budget. The new revenue is earmarked for education, health care, and services for senior citizens, although the legislature would have the authority to appropriate it for other purposes. Gov. Kate Brown, who supports the measure, released a plan earlier this year indicating her priorities for new spending: more vocational and technical education; expanding the state’s Earned Income Tax Credit; and reforming business taxes by creating new deductions and closing existing loopholes.

With rising costs currently projected to outpace new revenue, if Measure 97 is defeated, Oregon will face the challenge of cutting $1.35 billion in services from the 2017-2019 budget or raising additional revenue elsewhere.

Proponents argue that the measure would help stabilize the state budget and reduce the risk of budget cuts, thereby allowing for increased investments in education, more accessible health care, and in-home services for seniors. They emphasize that only one quarter of one percent of businesses registered in Oregon would be affected—primarily large and out-of-state corporations not currently paying their fair share (even businesses that don’t turn a profit benefit from infrastructure and state funded services and should contribute accordingly).

Opponents stress the unprecedented size of the tax increase in absolute terms (though the economy of course is bigger today), estimated decreases in private jobs, and the regressive nature of the tax as some portion of the increase is projected to be passed on to consumers and would account for a larger share of incomes among those with low-wages. (Though note that the economic analysis by the Legislative Research Office indicates that the impact of the tax on private job growth is small, as are the changes in incidence.)

If voters can manage to wade through it all, their choice ultimately comes down to questions of values and trust. Do they want to take significant steps towards stabilizing their budget? Do they trust that new revenues would be used to shore up important public investments? Do they believe profitable businesses that benefit from being headquartered in Oregon and having access to markets in the state should be contributing more? Do they believe the prospect of regressive effects or private job dampening are outweighed by the ability to reduce class sizes, access to technical education, and provide greater security for seniors? We look forward to finding out.

For more information on Measure 97, see the Oregon Center for Public Policy’s FAQ blog post.

This post originally appeared on OKPolicy.org and is reposted here with permission.

The Gist

SQ 779 is a constitutional amendment that would raise the state sales and use tax by one percentage point. Of the total revenue generated by the new tax, 60 percent would go to providing a salary increase of at least $5,000 for every public school teacher. The remaining funds would be divided between public schools (9.5 percent), higher education (19.25 percent), career and technology education (3.25 percent), and early childhood education (8 percent). The State Board of Equalization would be required to certify that revenues from the new tax are not being used to supplant existing funds.

Background Information

The ballot initiative is responding to concerns among educators, parents, and others about teacher salaries and education funding.

Average compensation for Oklahoma teachers has fallen to 49th in the nation, and school districts are struggling to recruit and retain enough qualified teachers. Since 2008, Oklahoma has cut state support for the school aid formula by more than $170 million, and funding for higher education and career tech has also been cut.

This year about 1,500 teaching positions and 1,300 support worker positions have been lost to budget cuts in Oklahoma schools, yet schools still report about 1,000 unfilled teaching positions. Hundreds more positions are being filled by emergency certified teachers who do not meet the state’s legal qualifications to be a classroom teacher.

SQ 779 was placed on the 2016 ballot through a successful initiative petition effort that gathered over 300,000 signatures, more than double the required number (123,725). An effort to block the initiative as a violation of the single-subject rule of the state Constitution was rejected by the Oklahoma Supreme Court.

If approved, the new sales tax would take effect July 1, 2017 and is projected to raise $615 million in its first full year.

Supporters Say…

• Since lawmakers have made large cuts to education funding and repeatedly failed to approve a teacher pay raise, there is no other solution to the education funding crisis than passing a ballot initiative that includes a dedicated revenue source.
• Higher teacher salaries are needed to stop the flow of teachers to other states and other professions and to ensure a high-quality education for Oklahoma children. Low-income students are being harmed most by heavy teacher turnover and would benefit most from teachers being paid competitive salaries.
• The ballot measure includes strong constitutional safeguards to make sure the dollars will be spent as intended.
• In addition to the $5,000 pay raise for teachers, the measure would provide funds for such worthwhile purposes as improving reading, increasing high school graduation rates, creating a merit pay system, improving college affordability, and strengthening early childhood education.

Opponents Say…

• While teachers deserve a raise, there are ways to fund a pay raise without raising taxes and without committing to more spending on higher education and career tech.
• The sales tax is regressive, which means that the tax increase will affect low- and moderate-income households more than wealthier households.
• Oklahoma already has one of the highest combined state and local sales tax rates in the nation. A one percentage point increase will give Oklahoma the nation’s highest sales tax rate and push the rate above 10 percent in some areas. Cities, which are heavily reliant on the sales tax, will be hindered in their capacity to raise the sales tax for municipal priorities.
• Even with the measure’s language preventing money from SQ 779 supplanting other funding, there is nothing to prevent the Legislature from enacting further tax cuts that will offset this increase.

Ballot Language

This measure adds a new Article to the Oklahoma Constitution. The new Article creates a limited purpose fund to improve public education. It levies a one cent sales and use tax to provide revenue for the fund. It allocates funds for specific institutions and purposes related to the improvement of public education, such as increasing teacher salaries, addressing teacher shortages, programs to improve reading in early grades, to increase high school graduation rates, college and career readiness, and college affordability, improving higher education and career and technology education, and increasing access to voluntary early learning opportunities for low-income and at-risk children. It requires an annual audit of school districts’ use of monies from the fund. It prohibits school districts’ use of these funds for administrative salaries. It provides for an increase in teacher salaries. It requires that monies from the fund not supplant or replace other education funding. The Article takes effects on the July 1 after its passage.

Links to Other Resources

Text of Measure and Background Information: Ballotpedia

Text of Initiative Petition, Legal Challenges: Secretary of State

Supporters and Opponents

Oklahoma’s Children, Our Future: Yes on SQ 779 Website

Oklahoma State School Boards Association SQ 779 Information

Vote No on SQ 779 Facebook page

Other OK Policy Information

“Our statement on the proposed initiative to fund education with 1 cent sales tax increase”: OK Policy

“The progressive case for State Question 779”: David Blatt, Journal Record

In The Media

“City of Edmond Formally Opposes Sales Tax Increase to Pay for Education”:  KOSU

“We have a moral responsibility to our children”: Rev. Ray Owens, Tulsa World

“‘Watch-Out’ Video: The Arguments For, Against the Education Sales Tax”: Oklahoma Watch

“Opponent says education tax proposal aims to return Oklahoma to its ‘Dark Ages’”: Tulsa World

This post from October 2016 was updated on February 23, 2017.

When is a charitable contribution not a “donation” at all? If a taxpayer manages to turn a profit on the deal, has anything altruistic actually occurred? The clear answer is no. But an ITEP report reveals that the federal government does not always agree, at least with regard to certain gifts to private K-12 scholarship funds. Released late last year, the report’s findings may gain renewed public interest because the newly confirmed Education Secretary, Betsy DeVos, is a proponent of using public dollars for private school education and President Trump, according to reports, is considering a policy that would funnel federal dollars to private schools via federal income tax credits.

Tax incentives for charitable giving are common in the United States. More than 30 states, for example, allow a write-off for charitable donations that reduces the cost of giving by roughly 5 to 10 percent, depending on the state. A growing group of states, however, are using their tax codes to supercharge their charitable donation incentive for contributions to private K-12 scholarship funds.

In 17 states, tax credits for donations to private school scholarship funds reduce the cost of a donation by 50 percent or more. Even more remarkable is that in five states, tax credits equal to 100 percent of the donation are actually designed to wipe out the entire cost of donating to these schools. When a 100 percent tax credit is made available, the state is effectively bankrolling the entire donation at no true cost to the taxpayer that allegedly “donated” the funds. In essence, many of these policies have more in common with money-laundering schemes than they do with actual philanthropy.

But this may not even be the most unbelievable part of the arrangement. As explained in our report, certain high-income taxpayers can turn a profit by claiming a federal charitable deduction for so-called “donations” that were already reimbursed by the state. In other words, the IRS allows private school donors to enjoy a charitable deduction even when there was no charitable intent or effect behind their actions.

There are currently ten states (Alabama, Arizona, Georgia, Louisiana, Montana, Oklahoma, Pennsylvania, Rhode Island, South Carolina, and Virginia) where such profit-making schemes are possible. That list could soon grow, however, if states such as Arkansas, Idaho, Kentucky, Minnesota, Missouri, and Nebraska decide to move forward with similar credits currently under discussion.

These and other state tax subsidies collectively funnel more than $1 billion in public funding toward private schools every year. As our report explains, these subsidies function much like school voucher programs and have even been referred to as “neovouchers.” Relative to traditional vouchers, however, the lack of transparency in tax subsidy programs makes them better suited for skirting public opposition or even circumventing constitutional obstacles that sometimes stand in the way of spending public dollars on private schools. 

Read the report for more information on how high-income taxpayers are using neovouchers to turn a profit, and on the dubious educational benefits and general lack of accountability inherent in such programs.

With the announcement that New Jersey leaders have finally struck a deal to modernize the state’s badly outdated gas tax, work can soon finally resume to repair and maintain the state’s roads and bridges.

Unfortunately, as a New Jersey Policy Perspective (NJPP) report reveals, the deal leaves the state’s tax code in need of major repairs. Lawmakers approved a package that slashes about as much revenue as it raises while shifting taxes from the state’s wealthiest individuals to lower-income families.

The gas tax increase, which amounts to 23 cents per gallon, raises an estimated $1.2 to $1.4 billion per year. But the final package includes major tax cuts that add up to nearly as much. The package ultimately eliminates the estate tax, cuts the sales tax by 3/8 of a cent, expands an existing tax break for upper-middle-income retirees (though this expansion was reportedly scaled back Wednesday in committee), creates a new exemption for veterans, and increases the Earned Income Tax Credit for low- and middle-income working families.

An Institute on Taxation and Economic Policy analysis summarized in the NJPP report shows that, even without the estate tax cut that affects only about 3,500 of the wealthiest families each year, the package is regressive, raising taxes most on lower-middle- and middle-income New Jerseyans with incomes between $25,000 and $79,000.

And overall, if approved by the legislature Friday as expected, the package will cut about as much revenue out of the General Fund as it raises for the Transportation Trust Fund (TTF). This means that New Jersey lawmakers are effectively paying for transportation infrastructure with money taken from other areas of the budget such as schools, health care, and public servants’ pensions.

You wouldn’t tear down a school building to fill potholes with the rubble, but by shifting taxes from the General Fund (and higher-income New Jerseyans) to the TTF (and lower-income New Jerseyans), New Jersey leaders are damaging one part of their tax code to prop up another. Read the full NJPP report here.

This week we are bringing you news of a rotten tax deal in New Jersey, revelations in Kansas, a search for a sound and politically feasible tax reform package in Louisiana, and more state tax happenings. Thanks for reading the Rundown!

— Meg Wiehe, ITEP State Policy Director, @megwiehe

• New Jersey‘s roads department can soon get back to work as leaders have finally struck a deal to update the state’s badly outdated gas tax. But the final deal is a bad one for the people of New Jersey, as the net result of the package is a tax shift that is both regressive and damaging to important state priorities like schools and the state’s pension shortfall. Check the Tax Justice blog for more on the development in coming days. Check out this blog post from ITEP’s Dylan Grundman for a deeper dive into this no good, very bad deal.
• It’s been another newsworthy week in Kansas. Economic reports showing quarter after quarter of poor performance have been obscured and then scrapped. Revenues for the first quarter of FY 2017 miss the mark. And Gov. Brownback hints at a course reversal on tax policy in anticipation of a state Supreme Court ruling that could require hundreds of millions of new dollars to adequately fund public education.
• Louisiana‘s Task Force on Structural Changes in Budget and Tax Policy has delayed the release of recommendations for reform until November as it works to find the intersection between sound policy and political feasibility, rarely an easy task.
• The California Legislative Analyst’s Office released a new report of the state’s first film credit program. Similar to other film tax credit studies, findings include that the program had minimal impact on the economy, led to negative net revenue, and subsidized an otherwise profitable industry.
• Expect to see tax proposals debated this coming legislative session in Idaho to increase the gas tax, in Indiana to raise the cigarette tax, in New York to increase the child care tax credit, and in Texas to cap property tax growth.

What We’re Reading…

• The Pew Charitable Trusts reports on persistent budget pressures leading some cities and states to consider expanding taxes to previously exempt non-profits.
• Voluntary tax agreements between Airbnb and cities are under scrutiny as concerns rise regarding tax avoidance and unfair regulatory advantage.

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 Meg Wiehe at meg@itep.org. Click here to sign up to receive the Rundown via email.

A new report by Citizens for Tax Justice (CTJ), the Institute on Taxation and Economic Policy (ITEP) and the U.S. Public Interest Research Group (PIRG), finds that Fortune 500 companies are now holding $2.5 trillion in earnings offshore. The report finds that holding these earnings offshore allows companies to avoid an estimated $718 billion in taxes. Given the huge amount of revenue at stake, it is no wonder that congressional leaders and even the presidential candidates have begun looking at these earnings as a potential source of government revenue.

The key driver of offshore tax avoidance by U.S. companies is the tax loophole that allows companies to defer paying taxes on their foreign profits until they are repatriated to the United States. This provision creates a huge incentive for companies to shift and hold their income in low- or no-tax jurisdictions (aka tax havens) because it allows them to avoid paying U.S. taxes.

The most prominent example of a company engaging in extensive offshore tax avoidance is Apple. According the report, Apple is holding as much as $215 billion offshore on which it owes an estimate $65.4 billion in taxes, meaning that it has managed to pay a tax rate of only 4.6 percent on its offshore earnings. A report from the European Commission found that the company accomplished this in large part by holding about $115 billion in Ireland virtually tax-free.

As the report finds, Apple is not alone in its tax avoidance. Financial service company Citigroup is avoiding $12.7 billion in taxes on the $45.2 billion in earnings they have offshore. The sneaker and clothing giant Nike is avoiding $3.6 billion in taxes on their $10.7 in profit offshore. In fact, a total of 298 of the Fortune 500 companies declare holding some amount of earnings offshore for tax purposes.

The issue of what to do about these offshore funds has become so important that it was discussed during the recent presidential candidate debate between Hillary Clinton and Donald Trump. For his part, Trump has proposed requiring companies to immediately pay a 10 percent tax rate on their offshore earnings. Unlike Trump, Clinton has been less clear about her plan for the offshore earnings, but she has proposed previously to raise $275 billion in revenue from “business tax reform,” which mirrors the amount of revenue that would be raised by President Barack Obama’s proposal to allow companies to pay a rate of just 14 percent on their offshore earnings.

While both approaches may generate some money in the short term, they would end up giving companies a huge tax break on their offshore earnings. Rather than paying a discounted rate, the best option would be to require companies to immediately pay the full amount, $718 billion by our estimate, they owe on their accumulated offshore earnings. Going forward, companies should be required to pay U.S. taxes immediately on their offshore earnings (subtracting taxes already paid to foreign governments), which would put an end to any tax advantage companies receive by shifting their profits into tax havens.

Unfortunately, Congress appears to be headed on a path toward allowing companies to pay a discounted tax rate on their offshore earnings. In a recent series of interviews, Republican House Speaker Paul Ryan and Democratic Minority Leader Nancy Pelosi both noted that a corporate tax reform legislation with some form of repatriation was a possible area of compromise in 2017. Hopefully, lawmakers will resist the relentless lobbying of corporations to give them a tax break and instead put an end to offshore tax avoidance once and for all.

This fall, in addition to casting their votes for elected officials, voters will also determine significant tax policies through ballot initiatives in states and localities across the country. ITEP will be highlighting a number of tax-related measures on the Tax Justice blog in the coming weeks.

Among the measures to be decided by Californians this November is Proposition 55—an extension of increases to the personal income tax rates paid by the wealthy that voters adopted in 2012.

Prior to 2012, high-income taxpayers in California all paid the same marginal rate of 9.3 percent on taxable income over $103,000 (filing jointly)—whether they had $103,000 or $103 million. In the wake of the great recession, voters approved Proposition 30, which made the personal income tax more progressive by temporarily increasing marginal tax rates on the wealthy and also increasing the sales tax by ¼ cent. Absent a change in the law, the sales tax increase will end this year and the higher marginal rates on those earning more than $526,000 (filing jointly) will expire in 2018.

Proposition 55, “Tax Extension to Fund Education and Healthcare,” asks voters whether the income tax rate increases on the wealthy should be extended through 2030. If it passes, the policy is expected to generate between $4 and $9 billion a year, revenue that would go toward meeting constitutional requirements (including public education and the state’s Medicaid program), maintaining existing services, and investing in other budgetary priorities as the funds allow. (See the CA Legislative Analyst’s full analysis of the proposition here.)

ITEP analysis shows that the income tax changes from Proposition 30 and 55 are positive steps toward a more progressive state and local tax system. Without Proposition 55, the top 1 percent of taxpayers would pay an estimated 7.8 percent of their incomes in state and local taxes—a smaller share of their incomes than taxpayers in the bottom 60 percent. With Proposition 55, the wealthy would be required to pay a more proportionate share at 8.7 percent.

Proponents of Proposition 55 emphasize the critical role revenues from the higher rates have played in stabilizing and improving the public school system and saving other services from more devastating cuts in the years following the recession. To them, maintaining these public investments through Proposition 55 by having the wealthy continue to pay their fair share is smart tax and public policy.

Opponents emphasize concerns over relying on unstable sources of income given the volatility in incomes at the top, warn of tax migration, and bemoan the temporary nature of temporary tax increases. (Though surprisingly, there hasn’t been a strong oppositional response to the measure.)

While the incomes of the wealthy do fluctuate more with broader economic conditions, additional revenues available to the state through Proposition 55 would also help shore up contributions to the state’s rainy day fund, a critical tool for smoothing spending over variable economic conditions that can reduce harmful cuts and reliance on temporary tax measures to stabilize budgets and government services.

Counter to claims that taxing the wealthy leads to a depressed economy, California has fared well in the years since the higher tax rates of Proposition 30 were adopted, with an economy that grew faster than the U.S. overall. (Compare to Kansas which infamously cut taxes during the same time period.) And, as has been repeatedly shown but confirmed once again recently by researchers at Stanford University and the Treasury Department, millionaire tax flight is of marginal statistical and socioeconomic significance, making it essentially a negligible issue when determining statewide tax policy.

Six weeks out from the election, field polls suggest strong support for Proposition 55. If such support pans out at the ballot, it will be a positive step for tax fairness and public investments in California.

In the Tax Justice Digest we recap the latest reports, blog posts, and analyses from Citizens for Tax Justice and the Institute on Taxation and Economic Policy. Here’s a rundown of what we’ve been working on lately.

The Debate
During the presidential debate, both candidates seized on tax issues. CTJ analyst Richard Phillips attempts to make sense of the spin, by explaining the difference between a value-added tax (VAT) and a tariff and outlining how cutting taxes and debt reduction are opposing ideas. Read more

Trump’s Tax Plan
CTJ this week released a distributional analysis of Donald Trump’s latest tax proposal. The plan would add $4.8 trillion to the debt over a decade and reserves the greatest share of tax cuts (44 percent) for the richest 1 percent. Although the plan cuts taxes across the board, it increases taxes for some demographic groups. Read more

Increasing Transparency
When it comes to corporate tax data, the gatekeeper is a little known organization called the Financial Accounting Standard Board (FASB). ITEP used a comment letter this week to make the case to FASB for how more disclosure could help inform the public and lawmakers on how to best reform our tax code. Read more

State Rundown
This week’s state rundown discusses proposed new (or increased) taxes in Missouri, Illinois, Louisiana, California and Oregon and the spread of ‘dark store’ tax avoidance practices across the states. Read more

Offshore Tax Avoidance
Last week, Rep. Mark Pocan introduced the Corporate Transparency and Accountability Act, a bill that would require all publicly traded multinational companies to disclose their revenues, profits, taxes, and certain other operations information on a country-by-country basis (CbCR) to the Securities and Exchange Commission (SEC). Read more

If you have any feedback on the Digest or tax stories you’re watching that we should check out too, please email me rphillips@itep.org 

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

For those concerned with the fate of our corporate tax code, perhaps the most important organization to watch right now is the Financial Accounting Standards Board (FASB). While not well-known to those outside the accounting profession, FASB plays a critical role as the organization that sets the standards for what appears in corporate financial statements. What makes this role so important to the corporate tax debate is that FASB can require corporations to disclose information about the tax rates they pay in the U.S. and abroad—and is currently reevaluating its tax disclosure requirements.

One of the fundamental problems with the debate around our country’s corporate tax code is the lack of transparency on exactly how much companies are paying in taxes and how they structure their offshore operations. To the extent that this data is available, it comes in the form of companies’ publicly disclosed financial statements. For their part, Citizens for Tax Justice (CTJ) and the Institute on Taxation and Economic Policy (ITEP) rely heavily for these reports to estimate the effective tax rates of different companies or estimate how much companies may owe in taxes on their offshore income. While these reports provide critical insights into our corporate tax code, they are only as good as the data that financial statements provide and unfortunately this data is lacking in a number of important ways.

As an example, one of the biggest information gaps in current financial statements is that the overwhelming majority of companies with offshore earnings fail to report how much they would owe in taxes if they were to repatriate these earnings back to the United States. In fact, out of the 298 Fortune 500 companies that report offshore earnings, only 58 companies disclose how much in taxes they would owe on this money on repatriation. This incomplete disclosure makes it difficult for lawmakers and the public to assess the extent to which companies are holding these earnings in tax havens to avoid U.S. taxes.

For the past few years, FASB has undertaken a wholesale overhaul of its disclosure requirements in order to make them more effective. Recognizing many of the problems with income tax disclosures, FASB recently proposed draft rules expanding the disclosure of income tax information and related information. While the changes FASB is proposing are helpful, in a comment letter to FASB sent today, ITEP called on the board to use this disclosure review process to bring complete transparency to company filing by requiring them to publicly disclose basic tax and financial data on a country-by-country basis.

If FASB required companies to disclose their income, revenues, assets and income tax paid on a country-by-country basis, this information would reset the corporate tax debate by providing a more complete picture of the operations and tax status of our nation’s corporations. The public would be able to see more clearly the extent to which the nation’s largest companies are engaging in tax avoidance. With this information in hand, the public and their representatives could make a better informed decision about the ways in which our corporate tax code needs to be reformed.

Even minor expansions to the current disclosure rules could prove important to the corporate tax debate. For example, FASB proposes to require companies to report their income taxes paid both in the United States and abroad. This information would better inform the debate on the corporate tax code by allowing the public access to a second measure of companies’ domestic effective tax rate.

While the work of FASB is often unappreciated, its decisions over the next few months will have important implications for our understanding of the corporate tax code and the reforms that it needs. Hopefully, FASB’s work will add greater transparency to the murky corporate tax debate.