Tag: TaxJusticeBlog

Government functions in Minnesota shut down July 1 and that shutdown continues, nearly two weeks later, as a result of a stand off between Governor Mark Dayton and conservatives in the state’s legislature.

The Governor is using this week to talk directly with Minnesotans and share his message of taking a balanced approach to the crisis. He says, “I’m asking the wealthiest Minnesotans to pay a little more in taxes so that children with special needs don’t have to be denied services … and that’s a Minnesota value.”

The Governor has recently offered an olive branch to conservative lawmakers saying he’d be willing to compromise. He’s even offered  to make his proposed tax on millionaires temporary, increase cigarette taxes, increase surcharges on hospitals and health plans and even delay payments to schools.  Yet legislators rejected these ideas and have yet to offer any alternative budget proposal of their own.

Dayton is clearly willing to negotiate (though we question the wisdom of a cigarette tax), but the uncompromising negotiation technique of the legislature leaves Minnesotans to deal with the consequences of this avoidable standoff.

Make no mistake, each day that the shutdown is allowed to continue Minnesotans and their state’s economy are harmed. Paul Anton in a recent MinnPost piece notes that “Layoffs of state workers drain about $23 million a week in purchasing power from the state’s economy. Estimates are that the state loses $1 million a week in revenue while the state parks are closed and another $1.25 million a week while the state lottery is not operating.” Of course there are tremendous incalculable impacts too.  Background checks and license renewals for health care professionals simply aren’t happening. Let’s not forgot the impact to local governments, schools districts may actually end up having to pay higher interest costs because they may need to borrow more money to balance their own budgets because of delays in state payments.

The St. Cloud Times recently opined, “We don’t support Gov. Mark Dayton traveling the state to talk about his efforts to solve the state’s budget problem. History shows these efforts tend to preach to the choir, no matter the political faith. Then again, we can’t really blame Dayton because the people he needs to talk with — Republican legislative leaders — are clearly not willing to do anything remotely constructive to end this shutdown.”

Dayton has shown he’s willing to negotiate and he’s got the right idea to raise taxes in a progressive way to ensure vital services aren’t cut. Let’s hope for the sake of Minnesota that it doesn’t take the Legislature too much longer to come to a similar conclusion.

Photo via Governor Dayton Creative Commons Attribution License 2.0

Senator McConnell’s convoluted proposal for lawmakers to raise the debt ceiling while avoiding the blame (see related article) shows that GOP leaders are trying desperately to escape a trap. On one side are anti-tax ideologues like Grover Norquist and his group, so-called Americans for Tax Reform, who have organized a “no new tax pledge” signed by many lawmakers.

On the other side is the American public, which has made clear that it prefers any reduction in the budget deficit to include a mix of spending cuts and revenue increases.

Bruce Bartlett, a Republican who worked for President Reagan and the first President Bush, presents a long list of polls showing support among Americans for raising taxes to deal with the deficit. Here’s just a sample of the polls he cites:

A June 9 Washington Post/ABC News poll found that 61 percent of people believe higher taxes will be necessary to reduce the deficit.

A May 13 Bloomberg poll found that only one third of people believe it is possible to substantially reduce the budget deficit without higher taxes; two thirds do not.

A May 12 Ipsos/Reuters poll found that three-fifths of people would support higher taxes to reduce the deficit.

An April 29 Gallup poll found that only 20 percent of people believe the budget deficit should be reduced only by cutting spending; 76 percent say that higher taxes must play a role.

An April 22 New York Times/CBS News poll found that 72 percent of people favor raising taxes on the rich to reduce the deficit. It also found that 66 percent of people believe tax increases will be necessary to reduce the deficit versus 19 percent who believe spending cuts alone are sufficient.

An April 20 Washington Post/ABC News poll found that by a 2-to-1 margin people favor a combination of higher taxes and spending cuts over spending cuts alone to reduce the deficit. It also found that 72 percent of people favor raising taxes on the rich to reduce the deficit and it is far and away the most popular deficit reduction measure.

A March 15 ABC News/Washington Post poll found that only 31 percent of voters support the Republican policy of only cutting spending to reduce the deficit; 64 percent believe higher taxes will also be necessary.

See the rest of the polling that Bartlett cites on his blog.

Photo via Talk Radio News Creative Commons Attribution License 2.0

Jeffrey Immelt, CEO of the company famous for making profits of $26 billion from 2006 through 2010 and receiving tax benefits from the IRS of $4.1 billion over that period, has endorsed the recently proposed amnesty for corporate tax dodgers, called a “repatriation holiday” by its proponents.

Immelt was selected by President Barack Obama in February of 2009 to chair his Council on Jobs and Competitiveness, which is to advise the White House on economic policy. He has been CEO of General Electric since 2000.

In March, the New York Times reported GE’s federal corporate income tax bill of negative $4.1 billion over the five-year period in which it earned $26 billion in profits, which is an effective tax rate of negative 15.8 percent. A recent report from CTJ focuses on the three-year period 2008-2010 and finds that GE earned $7.7 billion in profits during this period and had a federal corporate income tax bill of negative $4.7 billion over this period.

Following the New York Times revelations, progressive activists spearheaded a call for Immelt’s resignation from the President’s Council on Jobs and Competitiveness.

His call for an amnesty for offshore tax dodgers will surely give more ammunition to those demanding that he step down from the Council.

What Does an Infrastructure Bank Have to Do with an Amnesty for Corporate Tax Dodgers? Nothing.

A repatriation holiday is essentially a break from U.S. corporate income taxes on offshore profits that U.S. corporations bring back (repatriate) from foreign countries, particularly from tax havens.

The non-partisan Joint Committee on Taxation (JCT), the official revenue-estimator for Congress, has concluded that a repeat of the repatriation holiday that was enacted in 2004 would reduce revenue by $79 billion over ten years.

Yet Immelt, confusingly, says that a repatriation holiday could be used to fund an infrastructure bank. How can a measure that reduces revenue be used to fund anything?

It’s true that JCT finds that the holiday would raise some revenue initially because corporations would repatriate more profits to the U.S. than they normally would, and they would be taxed, albeit at a very low rate, on those profits. (The 2004 measure taxed repatriated offshore profits of U.S. corporations at a super-low rate of 5.25 percent.)

But in subsequent years the measure would cause much larger reductions in revenue, partly because corporations would be encouraged to shift even more profits and investments offshore.

Anything that costs $79 billion and encourages companies to shift even more profits and investments out of the U.S. has nothing to do with the goals of an infrastructure bank and should not be attached to any bill creating an infrastructure bank.

The infrastructure bank is supposed to create jobs, but the non-partisan Congressional Research Service (CRS) found that the repatriation holiday enacted in 2004 failed to create jobs and that the benefits went instead to corporate shareholders.

Read about how you can call your Senators and Representatives toll-free and urge them to oppose the amnesty for corporate tax dodgers. 

Photo via Steve Wilhelm Creative Commons Attribution License 2.0

After months of negotiations, California Governor Jerry Brown was ultimately unsuccessful in his attempt to balance the state’s massive budget using new tax dollars, specifically, $11 billion in revenues from an extension of temporary increased personal income and sales taxes and vehicle fees.  Rather than including the revenue in his own budget proposal, Brown stuck to a campaign promise to take all tax increases to the voters (this was also necessary because it takes a supermajority to pass tax increases in the legislature).  He was unable to garner the support of enough GOP legislators to put the extension on the ballot this summer or fall, so he gave up to allow the state’s budget to be completed in time for the new fiscal year.

On the eve of the new fiscal year, Governor Brown signed a plan that relies primarily on deep spending cuts and higher than previously forecast revenues to close the state’s budget gap.  Still, deeper cuts in spending will need to be made if revenues do not hit the $4 billion above target projection lawmakers counted on when balancing the budget.

In response to the enacted spending plan, the California Budget Project wrote: “This is a very tough budget for families and communities across California… it is deeply disappointing that the approved budget does not reflect a balanced approach that combines additional revenues with spending reductions to move the budget toward balance.”

One significant tax change did make it into the final budget.  California became the 7th state to adopt an “Amazon law” which will make it more difficult for state residents to evade sales taxes when shopping online.  Under California’s new law (which went into effect July 1), a larger set of online and catalogue retailers (specifically, those partnering with in-state businesses in order to generate sales) are required to collect and remit sales taxes.  Traditional brick and mortar retailers have dutifully fulfilled this responsibility for decades – and indeed, having the retailer collect sales taxes is the only effective method for enforcing existing sales tax laws.

In response to the enactment of this new law in California, Amazon.com and Overstock.com ended their relationships with their California affiliates (a move the retailers also made in North Carolina, Rhode Island and Connecticut).  These large online retailers’ tactics are doing very little to slow the spread of this sensible method for reducing sales tax evasion.  Illinois, Connecticut and Arkansas enacted Amazon laws this year and nearly a dozen more states seriously considered them.  The seven states with Amazon laws include nearly 30 percent of the country’s population.

Photo via Neon Tommy Creative Commons Attribution License 2.0

Republican leaders in the House and Senate have threatened to allow the U.S. to default on its debt obligations unless the President agrees to cut trillions from public services to reduce the budget deficit.

The federal budget deficit is a problem, but the timing and method of the GOP leaders approach are potentially disastrous. Deficit reduction should be timed to occur largely after we have recovered from the recession so that there is enough private spending and investment taking place to partially offset cuts in public spending.

The method of deficit reduction is even more critical. Republican leaders have insisted that we reduce the deficit entirely by cutting spending and not by raising tax revenue. This is illogical because clearly raising a dollar of taxes has the same effect on the deficit as cutting spending by one dollar.

Even more importantly, the U.S. is one of the least taxed countries in the industrial world, as explained in a report released last week by Citizens for Tax Justice. The report finds that all the other OECD nations except Chile and Mexico have higher taxes as a percentage of GDP than the U.S. The U.S. is clearly undertaxed and a revenue increase is the obvious answer to our deficit problem.

Photo via Talk Media News Creative Commons Attribution License 2.0

As Republican leaders met President Obama today to attempt to come to some agreement on raising the debt ceiling and reducing the deficit, the media has reported that Republicans are open to increasing revenue — but the details consistently seem to disprove this claim.

The New York Times reports that

“The president’s renewed efforts follow what knowledgeable officials said was an overture from [Republican House Speaker] Boehner, who met secretly with Mr. Obama last weekend, to consider as much as $1 trillion in unspecified new revenues as part of an overhaul of tax laws in exchange for an agreement that made substantial spending cuts”

But the article then goes on to say

“At a news conference on Thursday, Mr. Boehner, of Ohio, told reporters that “everything’s on the table, except raising taxes” on the American people, but he added that a tax overhaul that would close breaks and lower rates was part of the discussion.”

The Times reporters fail to notice that closing loopholes and lowering rates, with a result that does not “raise taxes,” is a description of revenue-neutral tax reform, which obviously does nothing to help reduce the budget deficit. How is this progress in negotiations over the deficit?

Last week, the Times ran an article with the headline, “2 Republicans Open the Door to Increases in Revenue.” The article explained that Senator John Cornyn (R-TX) said he was willing to close tax loopholes, but went on to say that any tax changes must be “revenue neutral,” meaning any reduction or elimination of tax loopholes must be accompanied by reductions in tax rates or some other type of tax cut so that the total amount of revenue would not increase.

The article also quoted Senator John McCain as saying he was open to some unspecified “revenue-raisers” but then also quoted him as saying, “The principle of not raising taxes is something that we campaigned on last November, and the result of the election was that the American people didn’t want their taxes raised and they wanted us to cut spending.”

In other words, the Times article is about one senator who is definitely not open to revenue increases and another who says nothing coherent at all about them.

Yesterday, the Washington Post added to the confusion by informing us that Eric Cantor, the House Republican Majority leader “signaled a new openness to raising taxes— at least for selected special interests.”

The article also quoted Cantor as saying, “But listen, we’re not for any proposal that increases taxes, and any type of discussion should be coupled with offsetting tax cuts somewhere else.”

In other words, Cantor is not open to raising taxes overall and therefore not open to raising revenue, which is the only way any tax changes would help reduce the deficit.

Republican leaders appear to be sticking to an ideological position opposing any increase in tax revenue. It’s a position that defies common sense in a country that is taxed far less than other industrial countries, and it’s a position that is opposed by large majorities of Americans in swing states. Why the press is trying to present GOP leaders as more reasonable is anyone’s guess.

Photo via Speaker Boehner Creative Commons Attribution License 2.0

Despite the fact that the move would actually increase the deficit by an estimated $3.4 billion, House Republicans voted to slash the IRS’s budget by $600 million.

Unlike most types of public spending, increased funding of the IRS actually reduces the deficit. In some cases a dollar of additional IRS funding can generate $10 of revenue. Because of this, the non-partisan National Taxpayer Advocate noted in her recent report to Congress that the IRS should be viewed as not part of the deficit problem, but rather “as part of the solution.”

Taking this perspective, the Obama Administration proposed earlier this year to increase the IRS’s budget from $12.1 billion to $13.3 billion, in a move that was expected to actually reduce the deficit.

A $1.1 billion increase in funding would help the IRS reduce the “tax gap,” the difference between the amount of taxes owed and the amount of taxes actually paid on time. The tax gap is estimated to be between $400 to $500 billion each year.

One recent article points out that “the biggest losers” in the failure to stop tax evasion “are America’s wage earners and salaried workers, who pay an estimated 99 percent of their taxes on time because their taxes are automatically withheld from their pay and reported by a third party, their employers.” These working people — the vast majority of Americans — must pay even more in taxes when others evade theirs.

Other than tax evaders, it’s unclear who the decrease in funding is supposed to benefit. It’s certainly not law-abiding businesses or individuals, who according to a report by the law and lobbying firm K&L Gates would actually face higher compliance costs if the cut in funding is enacted.

CTJ’s director, Bob McIntyre, addressed IRS enforcement a few years ago before the Senate Budget Committee. Just returning the IRS to the staffing levels of a decade ago, he said, would require a 50 percent increase in the IRS enforcement budget. Taking this a step further, McIntyre noted that, given the increase in tax sheltering in recent years, it may be necessary to double the resources for tax enforcement in order to keep up with tax evasion.

If lawmakers are serious about reducing the deficit, then reforming and dramatically increasing (rather than decreasing) funding for the IRS is one place to start.

Photo via alykat Creative Commons Attribution License 2.0

The House Judiciary Committee approved the so-called “Business Activity Tax Simplification Act” (BATSA), H.R. 1439 today.

Corporate lobbyist pushing this bill make the deceptive argument that simplification will result from limiting state and local governments to taxing only those businesses that have a “physical” presence in the state.

The “physical presence” standard doesn’t make any sense in the internet age, when we all buy so many goods and services from companies that do not have physical facilities in our state but still benefit from the state and local services that make commerce possible.

In any event, BATSA does not create a “physical presence” standard anyway because it has so many loopholes allowing large corporations with lobbying clout to avoid state and local taxes even though they have what any rational person would call a “physical presence” in the jurisdiction.

In May, CTJ sent a letter to the subcommittee handling the bill, explaining that we oppose BATSA because it would:

1. make state and local taxes on businesses dramatically more complex,

2. increase litigation related to business taxes,

3. increase government interference in the market and

4. reduce revenue to state and local governments by billions of dollars each year.

Read CTJ’s letter opposing the misnamed “Business Activity Tax Simplification Act” (BATSA).

Call both your Senators and your member of the House of Representatives at the toll-free number below and tell them:

“Oppose the amnesty for corporate tax dodgers, which corporate leaders call a ‘repatriation holiday.’ This giveaway to corporations should not be part of the deal on raising the debt ceiling or any other legislation.”

Call this number to be connected to your members of Congress.

1-888-907-8574

Here’s why this is important.

A “repatriation holiday,” which has been proposed by some Republicans and Democrats in Congress, would remove all or almost all U.S. taxes on the profits that U.S. corporations bring back to the U.S. from other countries, including profits that they shifted to offshore tax havens using accounting gimmicks and transactions that only exist on paper.

If you want to give your lawmakers’ staffs more information, you can also tell them that:

1. Another repatriation holiday will cost the U.S. $79 billion in tax revenue according to the non-partisan Joint Committee on Taxation.

2. Another repatriation holiday will cost the U.S. jobs because it will encourage corporations to shift even more investment offshore.

3. The repatriation holiday is an amnesty for corporate tax dodgers because those corporations that shift profits into tax havens benefit the most from it.

4. Congress enacted a repatriation holiday in 2004, and the benefits went to dividend payments for corporate shareholders rather than job creation, according to the non-partisan Congressional Research Service. Many of the corporations that benefited actually reduced their U.S. workforce.

For more information, see the recent post from Citizens for Tax Justice on one senator’s repeated flip-flops related to the repatriation holiday.

Thanks to AFSCME for providing the toll-free number to enable constituents to get in touch with their members of Congress regarding this critical issue.

In the final hours before the state’s new fiscal year was to begin, Iowa lawmakers agreed on a two year, nearly $6 billion, budget plan. The new budget was heavily debated during the state’s third longest legislative session. The state’s budget is now balanced for the next two fiscal years, and compromise on some key issues was reached.

For example, the Press-Citizen reports that Democrats agreed to freeze school spending for the current fiscal year and then to increase funding by two percent in 2013. Republicans agreed to provide $59 million for the state’s preschool program, more than they originally proposed.

In the case of costly cuts to corporate property taxes, however, no final agreement was reached; and that is a victory for tax justice advocates.

Governor Terry Branstad wanted to drastically reduce corporate property taxes. His proposal would have allowed businesses to shelter a full 40 percent of their property’s value from the property tax (by assessing commercial property at only 60 percent of its actual value for tax purposes). When fully implemented, the price tag for this measure was about $500 million. 

House Republicans weren’t willing to go that far, offering to shelter 25 percent of a property’s value. Senate Democrats were only interested in allowing targeted tax credits instead of across the board cuts. Ultimately, Iowa policy makers weren’t able to come to any sort of agreement.

But then, when it comes to handouts for corporations, that’s not such a bad thing.

Photo via Gage Skidmore Creative Commons Attribution License 2.0