Tag: TaxJusticeBlog

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Facebook: An Industry Leader in Rolling the Dice on Probably-Illegal Tax Breaks

The Facebook Corporation has been criticized for paying no income taxes in the U.S and in the rest of the world. The company leads the Fortune 500 in its use of executive stock options as a way of cutting its tax bill. But the company’s latest annual report, covering tax year 2015, adds a new wrinkle: Facebook is now an industry leader in its reliance on tax breaks it doesn’t believe are actually legal. The company discloses $1 billion in new “uncertain tax benefits” related to tax year 2015.These benefits in financial-reporting jargon are tax breaks the company claimed, but that Facebook believes have a greater than 50 percent chance of ultimately being disallowed by tax authorities. The Securities and Exchange Commission (SEC) requires corporations to disclose the value of these tax breaks because this statistic is a great indicator of which corporations are most aggressively pushing the legal envelope in the tax avoidance schemes they concoct each year. Facebook’s 2015 uncertain tax breaks are bigger than those disclosed by Amazon, Boeing, DuPont, Ford Motor and Goldman Sachs put together.

Verisign: Cornerstone of the Tuvalu Economy?

Verisign is less visible than tech giants such as Microsoft and Facebook, in part because the company specializes in maintaining the infrastructure of the Internet. But the company has been every bit as successful as its larger compatriots in avoiding corporate income tax liability. The company’s latest annual report shows that it paid no federal or state income taxes, after subtracting an executive-stock-option tax break, on $250 million in U.S. profits in 2015. And over the past five years, Verisign reports just $1 million in current federal income taxes on over $1 billion in income, for a five-year tax rate of just 0.1%. The company’s low foreign tax rates look downright confiscatory by comparison: Verisign paid an 11.5 percent foreign tax rate on $970 million in foreign profits over the same period. The company notes cryptically that “[a] significant portion of our foreign earnings for the current fiscal year was earned in low tax jurisdictions,” but doesn’t specify what fraction of these profits were placed in Verisign’s subsidiaries in the Cayman Islands or Tuvalu. 

Immigration policy—it’s a politically contentious issue but one of key importance in current state and national debates. To dispel inaccuracies and provide sufficient information to inform these debates, ITEP released today an updated report on the state and local tax contributions of undocumented immigrants. 

The report, Undocumented Immigrants’ State and Local Tax Contributions, finds that undocumented immigrants living in the United States collectively pay an estimated $11.64 billion dollars each year in state and local taxes. Contributions vary by state, ranging from less than $2.2 million in Montana with an estimated undocumented population of 4,000 to more than $3.1 billion in California, home to more than 3 million undocumented immigrants. Nationwide, the average tax contributions of undocumented immigrants equal 8 percent of their income. In contrast, the top 1 percent of taxpayers in the United States pay an average nationwide effective tax rate of just 5.4 percent.

See the report for state-by-state estimates on undocumented immigrants’ current state and local tax contributions, including breakdowns of sales and excise, personal income, and property taxes.

Further, the report shows how the tax contributions of undocumented immigrants would increase if more were granted a pathway to legal status due to increased earnings and higher compliance with the tax code. If all undocumented immigrants in the United States were granted legal status and allowed to work legally, their state and local tax contributions would increase by an estimated $2.13 billion a year, with their nationwide effective state and local tax rate increasing to 8.6 percent.

The report also examines the potential state and local tax impact if President Obama’s 2012 and 2014 executive actions are upheld and fully implemented.  We estimate that the tax contributions of the more than 5 million undocumented immigrants who would be eligible for temporary reprieve under the actions would increase by an estimated $805 million. (Smaller gains in this scenario reflect the fact that the executive actions would only affect around 46 percent of the undocumented population and do not grant a full pathway to legal status.)

See the report for state-by-state estimates of the post-reform state and local tax contributions of the total undocumented immigrant population and of the 5 million undocumented immigrants directly affected by President Obama’s executive actions.

While our estimates look only at the tax consequences of immigration reform on state and local taxes, it’s important to note that our findings mirror those at the federal level. Full immigration reform at the federal level would decrease the deficit and generate more than $450 billion in additional federal revenue over the next decade, according to a 2010 report from the non-partisan Congressional Budget Office. And the president’s executive actions are estimated to have positive effects on labor market growth and productivity, as well as wages and economic growth according to both the Council of Economic Advisers and the Center for American Progress.

To view the full report, find state-specific data, or review our methodology go to www.itep.org/immigration/.

Ensuring Indiana has funding needed to adequately repair its roads and bridges over the next several years is a top priority among lawmakers this legislative session. Among the proposed infrastructure improvement plans is HB 1001, which would raise the state’s gasoline tax by 4 cents per gallon, the tax on diesel fuel by 7 cents, and the cigarette tax by $1 per pack. The package would increase road funding by an estimated $500 million a year, with the revenue from the cigarette tax increase offsetting general revenue funds that would be newly diverted for transportation.

The House bill also includes a $294 million tax cut via a gradual reduction in the state’s personal income tax rate to 3.06 percent. By also proposing a reduction in the personal income tax, the bill undermines revenue potential for infrastructure improvements, deprives the state of revenue needed for other critical investments, and exacerbates the unfairness of Indiana taxes (Indiana has the tenth most unfair tax system in the country). Hoosiers among the bottom 80 percent of earners already pay a higher share of their income in state and local taxes than those in the top 20 percent. Under HB 1001, the average taxpayer among the bottom 80 percent would see a tax hike while the wealthiest 20 percent would benefit from a tax cut.

HB 1001: Taxing the Bottom and Cutting the Top

Our analysis[i] of HB 1001 illustrates how upper-income taxpayers come out ahead under this proposal. Gas and cigarette increases are regressive—meaning that middle- and low-income families pay a larger share of their incomes than the wealthy. As shown in Table 1, taxpayers making less than $22,000 will see their taxes go up by 0.7 percent of their incomes while taxpayers in the top 5 percent will pay increases less than 0.05 percent under the proposed gas and cigarette changes.

While cutting the personal income tax can offset some of the regressive effects of raising regressive consumption taxes, cutting the income tax rate disproportionately benefits wealthier taxpayers, worsening the tax fairness of the proposal.[i] The combined impact of these regressive tax increases and cut to the income tax rate would result in a tax increase for the average Indiana taxpayer in the bottom 80 percent and an average tax cut for the top 20 percent. For families in the bottom 20 percent, this means an average tax increase of $79 while those in the top 1 percent would see an average tax cut of more than $1,200.

More Equitable Alternatives

If lawmakers are intent on offsetting regressive consumption tax increases with tax cuts, there are more equitable ways to do it. We considered three alternatives, all of which would cost the same amount as the proposed rate cut but better target the cut to households who are already being asked to pay a higher share of their income in Indiana taxes.

The three proposals include raising the personal exemption by $1,530 for all taxpayers, raising the personal exemption by $2,150 for households with income less than $100,000 (or $50,000 if single or married filing separately), and coupling Indiana’s Earned Income Tax Credit (EITC) to the federal EITC and increasing it from 9 percent to over 32 percent. Table 2 shows how each of these alternatives compares to the proposed HB 1001 rate reduction.

Under Option 1, the same number of Hoosiers (90%) would receive an income tax cut as under the proposed rate reduction, but the share of the tax cut going to low- and higher-income households is rebalanced: the top 20 percent of earners receive 29 percent of the cut (instead of 55) and the remaining 80 percent of earners receive 71 percent (instead of 45). 

In Option 2, the tax cut is more narrowly targeted to the bottom 80 percent of earners. While these earners would still be paying a higher net tax under HB 1001 (the average increase in gas and cigarette taxes would be greater than their average income tax cut), this alternative gets closer to holding these taxpayers harmless than HB 1001’s rate cut.

Option 3 is the most targeted of the alternatives presented, targeting the cut to the bottom 60 percent of earners. Coupling Indiana’s EITC with the federal credit and increasing its value from 9 to over 32 percent would fully offset the impact of the proposed tax hikes on the average taxpayer in the bottom 40 percent of earners. It would also help offset the disproportionately high rate of taxes these earners pay in all Indiana state and local taxes.

Closing Thoughts

The gas tax is a critical source of revenue for funding state transportation infrastructure needs. Indiana hasn’t raised its gas taxes in 13 years, making money to pay for these critical investments harder to come by, especially in light of the growing costs of materials and construction. Given this, lawmakers’ efforts to raise the gas tax are applaudable, but pairing an increase for transportation funding with a large tax cut undermines the purpose of the tax increase while shorting the state of revenue needed to fund other critical state investments, including higher education, public health, and safe communities. Indiana would be better off pairing regressive tax increases with targeted tax cuts for working families rather than enacting cuts that tilt the state’s upside down tax system more in favor of the wealthy.

This post was originially published in the Indiana Institute for Working Families blog.

[i] While Indiana has a flat income tax rate, the effect of its income tax is not perfectly “flat” because the state offers some sensible tax breaks (personal exemption, rent deduction, EITC, etc.). Because of these tax breaks, a different portion of households’ income is subject to the flat income tax rate—for example, a personal exemption of $1,000 exempts 20% of income from taxation for a family with $5,000 while this same exemption only exempts 0.002% of income for a household with $50,000. Since a larger portion of middle- and high-income families’ income is subject to the income tax, when there is a reduction in the tax rate, they benefit more from the cut. (Note that while low-income families pay a smaller share of their income in personal income taxes, they still pay the highest share of their income in all state and local taxes combined.)

[i] This analysis was performed using the ITEP Microsimulation Tax Model, which is a tool for estimating the impact of federal, state, and local taxes by income group.  It uses a very large stratified sample of federal tax returns, as well as supplementary data on the non-filing population, to derive estimates that apply to taxpayer populations at the state level. The U.S. Treasury Department, the Congressional Joint Committee on Taxation, the Congressional Budget Office, and several state departments of revenue use similar models.  For a more detailed explanation of the ITEP Tax Model, see http://www.itep.org/about/itep_tax_model_full.php 

Thanks for reading the Rundown! Here’s a sneak peek: Missouri lawmakers want to move money from anti-poverty programs to road construction in a move some are calling unconscionable. Arizona could pass a first-of-its-kind tax credit for concealed weapons carriers. Louisiana paid out more in corporate tax breaks than it made in corporate tax revenue. One North Dakota lawmaker has regrets about a recent oil tax cut.

 – Meg Wiehe, ITEP State Policy Director

The Missouri Legislature will consider a proposal to shift money from programs for poor families and children to road construction. Last year, legislators passed the Strengthening Missouri’s Families Act over the veto of Gov. Jay Nixon. The two-part measure eliminated the state’s Temporary Assistance for Needy Families (TANF) benefits for 9,500 Missourians (6,300 of them children) and made another 58,000 adults ineligible for food stamps. The money saved was supposed to go to job training, child care and other programs to help poor Missourians; instead, lawmakers want to spend the money on road construction to avoid raising the state’s gasoline excise tax by 1.5 cents a gallon. Missouri has not seen a gas tax increase in almost 20 years.  Gov. Nixon, who supports the gas tax increase to pay for road construction, rebuked the idea of paying for roads with money diverted from safety net programs as a budget gimmick that “could jeopardize priorities such as local public schools, higher education and services for Missourians with developmental disabilities and mental illness.” An editorial in the St. Louis Post-Dispatch called the proposal “unconscionable,” arguing that if “Missouri drivers want better roads, they — and not the neediest among us — should bear the burden.”

One North Dakota senator says the state will soon come to regret its 2015 decision to lower its oil extraction tax rate. Sen. Jim Dotzenrod said in an op-ed for the Grand Forks Herald that the rate reduction from 6.5 to 5 percent will leave North Dakota with $132 million less in annual revenue if prices remain at $25 a barrel. The rate cut was adopted last year at the insistence of lawmakers who wanted to offset the elimination of a “trigger” provision in a 1987 drilling law. The trigger provision automatically reduced the extraction tax rate if oil prices fell below a pre-determined price of about $55 per barrel; given the recent steep decline in oil prices, the effective tax rate would have fallen from 6.5 to 1 percent if the trigger were not eliminated. While eliminating the trigger was broadly supported by the state’s political establishment, the choice to permanently lower the extraction rate from 6.5 to 5 percent was not. Dotzenrod notes that “the effect of this cut in the oil extraction tax could be quite high because it will be in place even when oil prices rise. For example, had this cut been in effect during the 2013-15 biennium, the revenue loss would have been well over $600 million.” He believes the rate cut will adversely affect future investments in public services.  

Louisiana lawmakers are zeroing in on highly inefficient tax credits as one reason for the state’s ongoing budget woes. The state’s Department of Revenue reports that Louisiana paid corporations $210 million more in tax rebates and credits than it collected in corporate income and franchise taxes. From 2004 to 2014, state spending on the six largest tax credits increased from $207 million to $1.08 billion. Gov. John Bel Edwards wants lawmakers to close or reduce several corporate tax giveaways to help plug a significant revenue gap.

If you carry a firearm in Arizona, you could get a tax break. A House committee passed a new tax credit of up to $80 for Arizonans who get concealed weapons permits. Only those who obtain permits after the passage of the credit will be eligible. The bill’s sponsor, House Majority Leader Steve Montenegro, says the tax credit encourages gun safety since individuals must attend firearms training classes to get a permit. The credit, which would be the first of its kind in the nation, would cost $1.9 million in revenue.

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

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

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

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

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

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

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

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

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

Shareable Tax Analysis:

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

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

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

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

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

Owens Corning Continues to Offshore Profits to Tax Havens

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

— Meg Wiehe, ITEP’s State Tax Policy Director

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

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

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

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

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