Tag: TaxJusticeBlog

Nebraska lawmakers had a long and contentious tax-cut debate this session but ultimately chose the wise path and rejected attempts to give a massive tax cut to the wealthy at the expense of the state’s schools, other public services, low- and middle-income families, and property tax payers.

Tax cut efforts in Nebraska last year ended with a promise to find a package over the summer that would resolve the differences between major factions within the state who sought different outcomes. But the death of LB 461 in the state legislature this week showed that no amount of wheeling and dealing, nor any innovative tax-cut gimmickry, can turn costly and regressive income tax cuts into a good idea for Nebraska.

The session began with a multitude of ideas, each of which had one or more fatal flaws in the eyes of some policymakers. Early proposals to pay for income and/or property tax reductions with sales tax expansions were unacceptable to Gov. Pete Ricketts and others who refused to support anything that might be branded as a tax increase. Plans backed by Gov. Ricketts and some of his allies focused on slashing income tax rates for wealthy Nebraskans and pushing the full cost of the tax cuts into future years using arbitrary tax cut “triggers,” but rural representatives wanted property tax reductions, many objected to giving most of the tax cut to the wealthy, and most lawmakers saw the “trigger” proposal for the fiscally irresponsible gimmick that it was. Another attempt to reduce rural property taxes through increased and redirected school aid was unpalatable to urban legislators who wanted their districts’ school aid kept whole. And all this unfolded as the state grappled with a projected shortfall of as much as $1.2 billion and neighboring Kansas’s recent tax-cut disaster continued to play out just to Nebraska’s south.

A compromise finally emerged from committee that included triggered personal and corporate income tax rate cuts and bracket consolidation, a small increase in the state Earned Income Tax Credit (EITC), and a phase-down of the personal exemption credit. But amendments and objections came flooding in immediately, and it became clear during the first round of debate that the bill had not succeeded in pleasing all these diverse factions. The bill had a little something for each faction, but retained the key flaws. ITEP microsimulation model analyses showed that more than half (54 percent) of the tax cut for Nebraska residents would go to highest-income 5 percent of Nebraskans. Additionally, much of the benefit from would have flown out of state, it still relied on “triggers” meant to obscure the true budgetary cost, and it shifted around property taxes without significantly reducing them for very many Nebraskans, all while undermining the revenue sources that could be used to actually reduce property taxes in the future.

The bill was ultimately rejected Tuesday, falling several votes short of the threshold needed to overcome its opponents.

The Apple corporation made waves earlier this week with its disclosure that its worldwide cash now exceeds $250 billion.  Less noticed was a separate disclosure on Wednesday that the company’s offshore cash now exceeds $239 billion, meaning that more than 93 percent of the company’s cash is now held—at least on paper—abroad. This represents an increase of $9.4 billion in the past three months, sending a clear signal that the company continues funneling money offshore to avoid U.S. taxes on a scale unmatched by any other U.S. company.

Taken on its own, holding cash abroad isn’t inherently bad behavior for a U.S. multinational engaged in business worldwide. But virtually everyone except Apple CEO Tim Cook now recognizes that in Apple’s case, the firm’s mountain of offshore cash reflects not the normal workings of a worldwide enterprise but a brazen effort to hide U.S. and European profits from the reach of the tax man. Back in 2013, the U.S. Senate’s Permanent Subcommittee on Investigation (PSI) made a careful and convincing case that Apple had used loopholes in the tax laws to make legal, but ethically reprehensible, “cost-sharing agreements” with its insubstantial Irish subsidiaries that allowed the company to avoid paying tens of billions of dollars in income taxes. Then, last fall, the European Commission (EU) ruled that Apple has used its Irish subsidiary for an elaborate profit shifting scheme that was not only unethical but downright illegal.

But you don’t need a lengthy investigation to know that Apple is dodging taxes offshore: the company’s annual report tells us so. The disclosures in the company’s latest 10-K reveal that Apple has paid a total foreign tax rate of less than 4 percent on its offshore cash. This means its unpaid U.S. tax bill on this cash is a whopping $75 billion.

It’s in this context that policymakers should be evaluating the current plan—supported by Congressional leaders and President Donald Trump—to offer a “tax holiday” for companies holding profits indefinitely offshore. While hundreds of companies hold at least a chunk of the $2.6 trillion plus in U.S. corporate cash that now sits offshore, Apple’s share is by far the biggest, and Apple’s near-zero foreign taxes on these profits mean that Apple would likely be far and away the biggest beneficiary from a low-rate holiday on offshore profits. Which means that the biggest winner from the proposed tax holiday is a company that has been on an illicit tax holiday of its own making for years.

The question isn’t whether Apple has played U.S. policymakers like a piano so far: it has. CEO Tim Cook has used his considerable PR skills to portray Apple as a helpless victim of a rampant corporate tax law, while insisting that the findings of the PSI and the EU are “total political crap.” But he has offered no evidence to counter these tax avoidance claims.

The real question is whether Congress will continue to be duped. Instead of offering a new tax holiday, Congress could easily make Apple pay its taxes. It could require Apple (and other companies shifting their intangible profits from the U.S. to foreign tax havens, for that matter) to pay their fair share by ending deferral of tax on offshore profits. This would give an immediate shot in the arm to U.S. tax collections, and it would help counteract the corrosive public fear that tax rules are written for and by powerful corporate interests.  If, instead, Congress instead follows President Trump’s recommendation and rewards Apple’s bad behavior with billions of dollars in new tax breaks, the public’s trust in our political leaders will be further eroded—and our leaders will deserve it. 

This week, Kansas lawmakers found that they’ll have to roll back Gov. Brownback’s tax cuts and then some to adequately fund state needs. Nebraska legislators took notice of their southern neighbors’ predicament and rejected a major tax cut. Both Hawaii and Montana‘s legislatures sent new state EITCs to their governors, and West Virginia began an uncertain special session as other tax debates also continued around the country.

— Meg Wiehe, ITEP Deputy Director, @megwiehe

• Efforts to slash taxes in Nebraska using a “trigger” mechanism have been defeated for the year after a bill failed to come close to overcoming a filibuster Tuesday. The bill, favored by Gov. Pete Ricketts and Revenue Committee Chair Jim Smith, would have primarily benefited high-income Nebraskans, worsened the state’s projected budget shortfall, and could have triggered tax cuts in economic hard times. Lawmakers turn to the budget today.
• Back from spring recess, Kansas lawmakers are working to find tax reform solutions that raise enough revenue to close budgetary shortfalls and meet constitutional requirements to adequately fund public education, all while receiving the necessary legislative votes to override a gubernatorial veto.
• Big news out of Hawaii this week: both the Senate and House voted to pass HB 209 yesterday. The bill, which would make permanent the top personal income tax brackets and rates on high-income earners and create a 20 percent nonrefundable Earned Income Tax Credit (EITC), now heads to the governor.
• Under a bipartisan effort, lawmakers in Montana have also passed a bill creating a state Earned Income Tax Credit (EITC) that would be 3 percent of the federal credit (and refundable). The governor is expected to sign the bill.
• Tomorrow marks the first day of West Virginia‘s special session. Yet, uncertainty remains regarding how the divided leadership will come to a budget and tax resolution.
• Despite a tight budget this year and ever present concerns about property taxes in the state, the Texas House has voted to phase out its franchise tax, which is currently one of three major revenue sources in the state. The approved House bill now makes its way to the Senate, which passed a similar elimination bill earlier this session.
• In a renewed effort to shore up funds, a hiring freeze on almost all state agencies went into effect this week in Wyoming. Lawmakers’ opposition to tax increases has left them with limited options for dealing with declining oil prices.
• Florida‘s legislative session is nearly complete. Most of Gov. Rick Scott’s proposed tax cuts have been ignored this year, but the latest package in the House still amounted to nearly $300 million in cuts, and the Senate is expected to approve about $142 million. A bill did pass to send an expansion of the state’s homestead exemption to voters in November 2018, which would cut property taxes and would sap an estimated $750 million of funding for local services that rely on property tax revenue and shift taxes onto businesses.
• A Wisconsin lawmaker is expected to release details soon for a plan that likely proposes to garner more funding for infrastructure investments by raising the gas tax and cutting the income tax through switching to a flat tax structure. Gas tax swaps like this have become increasingly popular, but all suffer from the same problem of boosting infrastructure funding at the expense of core public services like education and public health.
• In Oklahoma, a bill to raise the state’s cigarette and fuel taxes moves forward. If advanced, the bill would increase the cigarette tax rate by $1.50 per pack and the gasoline and diesel fuel by $0.06 per gallon. However, the Senate also passed a bill to reduce road funding in hopes that the fuel tax increase will fill the gap.
• The Seattle City Council has passed a resolution expressing intent to pursue a local income tax. Under a coalition’s proposal, adjusted gross income in excess of $250,000 would be taxed at 1.5 percent. In addition to shoring up the finances of Seattle, the income tax would provide a test legal case for the constitutionality of an income tax in the state of Washington.
• A proposal to tax sugary drinks in Santa Fe, New Mexico failed at the ballot yesterday.

What We’re Reading…  

• A new report from the California Budget & Policy Center explains the importance of raising awareness of the state’s Earned Income Tax Credit (EITC). The credit has been available since 2015.
• A new working paper from Columbia University law professor David Schizer explores the benefits of taxing both corporations and their shareholders, though in a coordinated fashion.

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. 

The Foreign Account Tax Compliance Act – or FATCA – is a financial disclosure and transparency law designed to crack down on international tax evasion by U.S. taxpayers who hold financial assets offshore. This law, passed in 2010 as part of the Hiring Incentives to Restore Employment (HIRE) Act, provides the Internal Revenue Service (IRS) with the information necessary to ensure that every U.S. taxpayer is tax compliant.

Despite – or perhaps because of – its important role in combating international income tax evasion, FATCA continues to have outspoken critics. The ongoing effort to repeal FATCA took one step forward this past Wednesday, when the House Oversight Committee’s Subcommittee on Government Operations held a hearing to “Review the Unintended Consequences of the Foreign Account Transparency Act.”

The forum could have been an opportunity to spur reasoned debate to address some of the issues raised by FATCA. Instead, Subcommittee Chair Rep. Mark Meadows (R-NC), who recently introduced a bill to repeal FATCA alongside long-time anti-FATCA champion Sen. Rand Paul (R-KY), used the hearing as an opportunity to cherry-pick extreme examples of FATCA’s (admittedly bumpy) implementation and rail against FATCA’s necessary disclosure of financial information to invalidate the entire law.

Despite what Rep. Meadows and Sen. Paul would like us to believe, FATCA is a critical and effective anti-tax evasion law.  It wasn’t created with the desire to rake through U.S. taxpayers’ financial data. FATCA was passed in the context of overwhelming evidence that certain U.S. taxpayers were taking advantage of the intricacies of the global financial system to hide assets offshore. For example, in 2009, 52,000 American-held accounts totaling over $14.8 billion in previously undisclosed assets were discovered at the Swiss bank UBS. And this is just one example at one bank – it is estimated that the United States loses $40 to $70 billion in revenue annually due to individual income tax evasion.

FATCA helps to close the gap between the revenue the U.S. government should collect and what it actually brings in by aggregating account information from both U.S. accountholders and their foreign financial institutions (FFIs). The IRS can then match what each individual reports against the information supplied by their FFI to identify misreported and unreported income. According to the IRS, sources of income that are not subject to either third-party-reporting or withholding are misreported at a 56% higher rate than sources that are subject to additional reporting and withholding. Matching statements of income provided by taxpayers against third-party sources is a common U.S. practice; it’s how the IRS identifies misreported information from wage (through your W-2) and investment income (through the 1099 series) each year.

When the HIRE act was first proposed, the Joint Committee on Taxation estimated that FATCA would raise approximately $8.7 billion over the next decade. While it’s difficult to measure how much FATCA has raised to date, the IRS recently reported that over 100,000 individuals have voluntarily come back into tax compliance through its voluntary disclosure program, resulting in approximately $10 billion in recouped taxes, interest, and penalties. Many have attributed this influx of voluntary compliance to taxpayers’ realization that FATCA increases their likelihood of detection if they misreport their worldwide income.

FATCA is designed to ensure that every American taxpayer is paying the correct amount of tax. Repealing FATCA would be a serious step in the wrong direction. Without a new law to take its place – which no one advocating for repeal has proposed – repeal would return us to the pre-FATCA status quo of having no meaningful way to crack down on international income tax evasion. This isn’t fair to law-abiding citizens who eventually end up picking up the tab when revenue is hidden overseas.

We should instead focus our energy on thoroughly vetting and advancing reform proposals – such as Sen. Sheldon Whitehouse & Rep. Lloyd Doggett’s “Stop Tax Haven Abuse Act” – that serve to improve and strengthen FATCA, rather than simply striking this important disclosure law from our books.

For more information on FATCA and how the law works to crack down on international tax evasion, ITEP has published a FATCA policy brief Foreign Account Tax Compliance Act (FATCA): A Critical Anti-Tax Evasion Tool and a one page FATCA fact sheet.

Three of the biggest needs facing state policymakers right now are new revenues to fund their priorities in the face of budget shortfalls and federal funding cuts, ways to insulate those revenue streams from unpredictable tax changes at the federal level, and approaches to meet these needs without leaning even more heavily on low- and middle-income families for revenue than they already do. As our newly updated brief shows, the six states that still allow an income tax deduction for federal income taxes paid can advance all three of these important goals. Lawmakers in Alabama, Iowa, Louisiana, Missouri, Montana, and Oregon should strongly consider repealing this costly, regressive, and volatile tax break.

As our brief outlines, these six states collectively will lose about $3.8 billion in revenue in 2017 due to this deduction. In three of the states—Alabama, Iowa, and Louisiana—the deduction is unlimited, allowing every dollar paid in federal income taxes to be deducted from income for state tax purposes. In the other three states, caps or phase-downs limit how much any one taxpayer can take advantage of the tax break. Not surprisingly, the three states without any limits on the deduction lose the most revenue ($2.7 billion combined). Those three states also give more of the break to their highest-income taxpayers than the states that limit it, with around 80 percent of the benefit going to the highest-income 20 percent of residents, though high-income families receive an outsized share of the benefit in every state that allows the deduction.

Some of these states are wisely taking notice and working to address these issues. In Louisiana, Gov. John Bel Edwards, a legislative tax study task force, and the state’s leading tax policy experts have all called for eliminating the deduction. In Iowa, although no major tax changes were ultimately approved this year, the deduction was targeted there as well. And repealing the deduction has also been considered in Alabama as a way of offsetting the revenue loss that would occur if the state repeals its tax on groceries.

With federal tax and budget debates heating up and rampant uncertainty about where those debates may lead, these six states have a clear opportunity to bring in needed revenue, protect that revenue from the whims of Congress, and advance tax fairness at the same time.

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. 

Here we go again
The Trump Administration on Wednesday released a tax sketch that is a roadmap for redistributing wealth upward. ITEP Executive Director Alan Essig in a statement said, “Our policymakers owe working people more than tax cuts (for the rich) with unrealistic promises of economic growth.” Among other things, the plan would cut the statutory corporate tax rate to 15 percent from 35 percent. Turns out many profitable Fortune 500 companies are already paying far less than the proposed statutory corporate tax rate. The tax sketch doesn’t include critical details such as how the administration proposes to pay for the plan. But, hey, at least the “biggest tax” cut plan wasn’t sketched out on a napkin.

Read ITEP’s tax reform principles for ideas on true tax reform.

3 Percent and Falling
ITEP today released the state companion report to its federal corporate study that examines effective income tax rates paid by profitable Fortune 500 companies from 2008 to 2015. Thanks to loopholes, subsidies and other tax giveaways, profitable corporations pay an average effective state tax rate of 2.9 percent, which is less than half the nationwide average 6.25 percent state corporate tax rate. Corporations’ declining state taxes come at a time when many states are grappling with how to fill budget gaps. Given these facts, it is hard to understand why some states continue to weigh how to further cut state corporate taxes. Read the study or read a brief blog summarizing the study.

STATE NEWS

Young Immigrants’ Tax Contributions Increase under DACA Protection
A new Institute on Taxation and Economic Policy report examined the state and local tax contributions of young immigrants eligible for DACA (deferred action for childhood arrivals) and found that, collectively, they annually contribute $2 billion in state and local taxes, but this number would drop by nearly half without DACA protection. The report notes that employment rates go up for young immigrants receiving DACA protection (from 51 percent to 87 percent), and they experience increased wages. Read more

Income Tax Best Solution for Alaska Budget Woes
For years, Alaska was so awash in oil revenue that it didn’t have a state income tax, and it provided all state residents with a yearly payout. Due to market forces, this has changed, and the state is now weighing how to raise enough revenue to fund basic priorities. A new ITEP report looks at Alaska’s revenue-raising options and finds that for most Alaskans, a state income tax would take less from their bottom line than other revenue-raising alternatives. Read a blog about Alaska’s budget concerns or read the full analysis.

The State Rundown
This week, transportation funding debates finally concluded with gas tax updates in Indiana, Montana, and Tennessee, and appear to be nearing an end in South Carolina. Meanwhile, Louisiana and Oregon lawmakers debated new gross receipts taxes, and Texas legislators considered eliminating the state’s franchise tax. 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

Sign up to receive the Tax Justice Digest

For frequent updates find us on Twitter, Facebook, and at the Tax Justice blog.

This week, transportation funding debates finally concluded with gas tax updates in Indiana, Montana, and Tennessee, and appear to be nearing an end in South Carolina. Meanwhile, Louisiana and Oregon lawmakers debated new Gross Receipts Taxes, and Texas legislators considered eliminating the state’s franchise tax. 

— Meg Wiehe, ITEP Deputy Director, @megwiehe  

• Louisiana Gov. Bel Edward’s Commercial Activities Tax (CAT) was pulled from committee early this week without a vote due to opposition, and it won’t be making any comebacks this legislative session. What comes next? The most concrete idea from the House right now appears to be a “standstill budget,” which would close half of the $1.3 billion hole the state faces with the expiration of the temporary sales tax increase. Bills based on the Task Force for Structural Change recommendations for budget and tax reform have been filed but have yet to be taken up. 
• While the Gross Receipts Tax debate is wrapping up in Louisiana, it’s just warming up in Oregon, where Sen. Hass has proposed replacing the state’s corporate income tax with a GRT like that used in Ohio, Texas, or Washington. 
• Texas lawmakers are considering bills in both the House and Senate that would phase out the state’s franchise tax with money from surpluses over a number of years until the tax is eliminated. The franchise tax is the state’s third largest source of income, projected to bring in $7.8 billion over the 2018-2019 budget year. These actions follow the passage of a budget for the coming year that cuts or underfunds health care, financial aid, and more. 
• As Nebraska legislators took a break from debating tax proposals this week to focus on the budget, the revenue forecast was adjusted downward yet again, shedding even more doubt on the tax-cut bills debated last week. 
• Efforts to prevent localities in California from enacting so called “Netflix taxes” (sales taxes on digital streaming services) has failed for the year due to opposition raised by local governments and cable companies. 
• Tennessee Gov. Bill Haslam’s “IMPROVE Act” — a gas tax update combined with cuts to business taxes, sales tax on groceries, and the Hall income tax – finally passed both houses of the legislature and was signed into law this week. One sticking point in the negotiations, a property tax cut for veterans, was added to the bill in the end. 
• South Carolina‘s gas tax debate is nearing an end, as the Senate approved a 12-cent-per-gallon increase with a veto-proof majority. However, the bill still has to go to conference committee to work out differences from the House bill, of which there are many. 
• In other transportation funding news, Montana and Indiana legislatures have approved infrastructure plans that include increases to their fuel taxes. Both plans are expected to receive the signature of their respective governors. Meanwhile, a new report in California shows that the gas tax increase passed by lawmakers earlier this month is a good start but falls short of what is needed to maintain roads in the long-term. And in Colorado, a plan to  raise the sales tax for road funding has met its end in the Senate. And after the effort to raise Alabama‘s gas tax was declared “dead” last week, the latest attempt is a bill to allow counties to put local increases on the ballot for local voters. 

What We’re Reading…   

• In a blog post, Ted Boettner of the West Virginia Center on Budget and Policy explains the impact the state’s “compromise tax proposal” would have on the average West Virginian.  
• In this story, the Center for Public Integrity examines the coordinated efforts and outcomes of conservative state tax reform efforts that benefit the wealthy and further disadvantage or do nothing for the poor. 
• A new study released by Pew Research Center finds that the American middle-class has contracted over the past two decades as those joining the ranks of the rich and poor have both grown. It also shows that middle-class Americans have fared worse than their counterparts in economically advanced European nations. 
• The Kentucky Center for Economic Policy’s Jason Bailey published a piece in the state’s Courier Journal laying out three principles needed in Kentucky’s tax reform efforts. 

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. 

Guest Blogger; Josue Chavarin, Program Associate at the California Endowment

California’s counties gain hundreds of millions of dollars in tax revenues from undocumented residents— collectively over $1.53 billion according to a new analysis from the Institute on Taxation and Economic Policy.

Public debates in California over immigrants, specifically around undocumented immigrants, often suffer from insufficient and inaccurate information about the contributions of undocumented immigrants, particularly tax contributions at the local and state level. This new analysis indicates that undocumented immigrants living in the California pay hundreds of millions of dollars each year in local taxes to the counties where they live (more than $1.5 billion) and collectively $3 billion combined in state and local taxes in the state of California.  

As California counties and localities mull over their approach to immigrant rights issues, accurate and objective information about the tax contributions of undocumented immigrants in communities is needed now more than ever. Most state and local taxes are collected from people regardless of citizenship status. Undocumented immigrants, like everyone else, pay sales and excise taxes when they purchase goods and services.  They pay property taxes directly on their homes or indirectly as renters. And, many undocumented immigrants also pay state income taxes. Property, income, and sales and excise taxes are one of the many ways that undocumented residents contribute to the health of California communities.

The new ITEP analysis provides county-by-county estimates on the current state and county level tax contributions of California’s 2.7 million undocumented immigrants as of 2014, and the increase in contributions if all these taxpayers were granted legal status as part of comprehensive reform[1].

Just how much do undocumented Californians contribute California and its counties in tax revenues? We estimate that Undocumented California’s tax contributions total $154 million in the Central Valley, $145 million in Orange County, $110 million in San Diego County, $100.6 million in Santa Clara County, $58.3 million in San Bernardino County, $29.3 million in Ventura County, $29.6 million in Sacramento County, and $544 million in Los Angeles County.  Undocumented immigrants in these counties also pay a variety of state taxes as documented in the table below.

Tax contributions in California would increase significantly above current levels if all undocumented immigrants currently living in the United States were granted a pathway to citizenship as part of a comprehensive immigration reform.  Granting legal status to all undocumented immigrants in the California as part of a comprehensive immigration reform and allowing them to work legally would increase their effective tax rate, thereby increasing their state and local tax contributions.

For example, we estimate that California’s Central Valley stands to gain $14 million, Orange County $14.5 million, San Diego $11 million, Santa Clara $10 million, San Bernardino $6 million, Ventura $3 million, Sacramento $3 million, and Los Angeles $140.6 million. In all, California as a whole stands to gain nearly half a billion dollars ($455 million) in tax revenues under comprehensive immigration reform. This does not include tax contribution increases at the federal level.  

Find the estimates for California’s 35 most populous counties HERE.

[1] Note: To maintain statistical accuracy, counties with smaller populations of undocumented residents were combined.

States are experiencing a rapid decline in state corporate income tax revenue, and the downward trend has become increasingly pronounced in recent years. Despite rebounding bottom lines for many corporations, a new ITEP report, 3 Percent and Dropping: State Corporate Tax Avoidance in the Fortune 500, 2008 to 2015,finds that effective tax rates paid by profitable Fortune 500 corporations are declining. In fact, since our last study (in 2014) those rates dropped from 3.1 to 2.9 percent of U.S. corporate profits.

The corporate income tax matters to states’ bottom lines and to the overall progressivity of states’ tax systems. In years like this one when more than half of all states face revenue shortfalls and lawmakers across the country are promoting lopsided “tax reforms” that would fall on states’ lower-income residents, it is particularly important for lawmakers to scrutinize the impact of corporate tax avoidance on their state budgets.

In practice, however, 3 Percent and Dropping finds that the opposite is happening. This report comes at a time when lawmakers in a number of states (including Louisiana, Oklahoma, and West Virginia) have considered outright repeal of their state corporate income taxes, and when several other states (including Arizona, Illinois, Indiana, Mississippi, New Mexico, North Carolina, and the District of Columbia) have moved to cut their corporate tax rates.

A variety of policy decisions are driving this decline. In addition to state tax rate cuts, states are providing “incentives” for companies to relocate or stay put. Consider the deal supposedly brokered by President Trump with Carrier in Indiana that included significant state tax breaks. If you think these incentives are too good to be true, they are. A recent New York Times story reported that Carrier did indeed keep some jobs in Indiana after the deal (roughly 800), but still more than 600 people will be out of work. And, there’s a real question about how much the state paid in breaks to retain each job. Blatant manipulation of loopholes by corporate accountants and the continued erosion of state corporate tax bases as a result of ill-advised linkages to the federal tax system also contribute.

States can take steps to strengthen the corporate income tax to ensure that the biggest, most profitable corporations pay their fair share. For more on the steps states can take, read 3 Percent and Dropping.

The most complimentary thing that can be said about the corporate tax changes outlined by President Donald Trump earlier this week is that they weren’t scribbled on a napkin. Unlike supply-side architect Arthur Laffer, who infamously sketched out his explanation for why tax cuts can somehow pay for themselves in this manner, the Trump administration took the trouble to fill an entire page (generously double-spaced) with information about how the President proposes to cut taxes as part of his as-yet-unwritten detailed tax plan later this year.

But while the President’s one-pager is clear on the easy questions—he says he’d cut the statutory corporate tax rate from 35 percent to 15 percent, making our corporate tax rate among the lowest among developed nations—the document is virtually content free on the hard question of how this tax cut will be paid for. The document says only that the plan will, “eliminate tax breaks for special interests,” without naming even a single tax break that would fall into that category or giving a sense of how universal that effort would be.

Far from filling the $2.2 trillion 10-year budget hole that would be created by cutting the corporate rate to 15 percent, in fact, Trump’s one-pager digs the hole deeper by proposing a move to a territorial tax system, opening the door for rampant tax avoidance by permanently exempting any income companies claim they earn offshore. And even the one apparent “revenue raiser” in Trump’s corporate outline (a one-time tax on the $2.6 trillion companies are currently claiming to hold offshore) should be thought of as a revenue loser, since these profits ought to be taxable at a rate closer to 35 percent than the 10 percent transition tax Trump has proposed in the past.

At a time when U.S. corporate tax collections are near historic lows as a share of the economy due to pervasive tax avoidance, and when the country faces persistent budget deficits, the first step toward corporate tax reform should be a detailed plan for ending wasteful corporate tax dodges, putting a name on each specific tax break that is deemed unaffordable or ineffective and identifying a plan for reform—or repeal. This week’s corporate tax outline sends a clear signal that the Trump administration is not at all serious about taking even this first step toward true reform, and is likely bent on simply pushing through exactly what Trump promised last week: “maybe the biggest tax cut we’ve ever had.”