Tax Loopholes

A Decade of Deep Cuts in PA. Don't Let It Happen.

Deep state cuts have already put health care at risk for kids and denied help to families struggling in this economy. They have put thousands out of work in schools, colleges, nursing care facilities and hospitals.

Think that’s bad? You ain’t seen nothing yet.

The Pennsylvania House may vote as soon as next week on a bill that will cut corporate taxes by close to a billion dollars by the end of the decade. More cuts to schools and health care will be next.

House Bill 2150 would close some corporate tax loopholes in Pennsylvania, but it is paired with big tax breaks for businesses. Even after counting new revenue from closing loopholes, this bill is a big money loser for the commonwealth.

The Pennsylvania Budget and Policy Center and Better Choices for Pennsylvania has an Action Page where you can send a message to your House lawmaker to reject this bill as is and to take steps to close tax loopholes more responsibly. Closing loopholes should not come at the price of budget deficits for years to come.

We’ve all seen the state budget headlines in recent months. 88,000 kids have had their public health coverage cut off. 14,000 Pennsylvanians have lost their jobs in schools and colleges. College tuition is rising, and help for families struggling in this economy is harder to come by.

Closing corporate tax loopholes could help Pennsylvania turn things around, but not if lawmakers pair it with business tax cuts that will cost us now and for years to come.

White House Plan to Close Special Interest Tax Loopholes Is the Right Approach to Reform, But Details Matter

The President has put forward the beginnings of a tax reform plan that takes the right approach, but is still missing critical details.
 
America needs a level playing field where businesses succeed by being more productive and innovative, not by hiding profits in the Cayman Islands or other tax havens. By ending special-interest tax preferences, the administration plan could help the economy and reduce debt, while addressing public outrage about large companies dodging their taxes.
 
The current system serves nobody except the relatively few companies that can most exploit these loopholes and the armies of tax lawyers and lobbyists that must be hired to play this destructive game.”
 
The President’s plan includes very promising proposals. If the details include reforms such as complete reporting of all profits and taxes paid, clear cut rules to end profit shifting to bogus off-shore subsidiaries and enforceable minimum rates to deter tax avoidance gamesmanship, then this plan will fulfill its promise.
 
Preventing firms from sheltering profits overseas will encourage companies to keep their business here.  We were encouraged to see some of the revenue raised put toward clean energy. We urge that loophole closing is pursued aggressively and that additional revenue will be put toward some combination of reducing the public debt and reducing severe cuts to public priorities.

What Do Jon Stewart, Elizabeth Warren, and Barack Obama Have In Common?

It’s been a big week for calling out corporate tax dodgers.

In his State of the Union speech, President Obama called for an economy where “everyone plays by the same set of rules” and where companies can’t avoid taxes by shifting profits overseas. He acknowledged what we’ve been saying for a long time which is that special interests have long played by a different set of rules than the rest of us – ones they’ve helped create, I might add.

That same night, Massachusetts Senate candidate Elizabeth Warren went on the Daily Show and called out 30 corporations that a recent Pennsylvania Public Interest Research Group (PennPIRG) and Citizens for Tax Justice study found paid more to lobby Congress than they did in federal income taxes between 2008 and 2010. When Warren told this to John Stewart on the Daily Show, it made the usually unflappable comedian’s jaw drop.

The special treatment that special interests have won over the years is on full display when it comes to our tax code. While small businesses and ordinary taxpayers pay taxes on the income they earn, companies like GE and Wells Fargo have so deftly manipulated the tax code that they paid no taxes on billions of dollars in profits between 2008 and 2010. In fact, they actually got tax rebates from Uncle Sam on tax day. While it may sound criminal, it’s all perfectly legal.

Most taxpayers can’t employ hoards of tax lawyers to manipulate the tax system or hire an army of lobbyists to craft the tax code in their favor. Warren put it best during her Daily Show interview: “Washington now works for those who can hire an army of lobbyists and an army of lawyers.” The “Dirty Thirty” companies identified by PennPIRG and CTJ all told spent nearly half a billion dollars lobbying Congress on tax policy and other issues over the three year period of the study. “They hire those people to make [the tax code] onerous so they can worm their way through,” as Stewart rightly asserted.

PA Tax Loophole Bill a First Step, More to Be Done

A blog post by Chris Lilienthal, originally published at Third and State.

Pennsylvania Representatives Dave Reed and Eugene DePasquale rolled out legislation today that would take an important first step towards closing corporate tax loopholes in Pennsylvania.

Corporate tax loopholes have been a problem for a long time in Pennsylvania. They don’t create jobs but do drain needed resources from good schools, health care and infrastructure.

Representatives Reed, a Republican, and DePasquale, a Democrat, deserve credit for recognizing this is a problem and taking steps to address it.

The bill, however, takes a limited approach and leaves many loopholes open for companies to exploit. It should be strengthened to ensure that big profitable corporations cannot use other artificial means to shift profits out of state and dodge taxes.

Matthew Gardner of Citizens for Tax Justice tells Philadelphia Inquirer columnist Joe DiStefano that combined reporting would be a better approach to closing loopholes. Under combined reporting, corporate net income tax would be assessed against income earned in Pennsylvania from a parent company and all of its related businesses.

As Gardner says:

Even if you’re successful in closing one [loophole], you’re doing nothing to stop the emergence of additional loopholes. Combined reporting ends the Whack-a-Mole game by taking away the incentive for companies to artificially shift income from one state to another.

Tax Havens Used by Romney and Large Corporations Cost Taxpayers Billions

With the heightened attention paid to Mitt Romney’s use of offshore tax havens, it is important to remember that tax havens are more than just an electoral issue. Tax havens are a serious policy matter that profoundly affects ordinary Americans, our economy, our national debt and our long-term competitiveness. Some facts to remember:

• Tax havens cost taxpayers an estimated $100 billion a year according to the Senate Permanent Subcommittee on Investigations. For comparison, this amount represents more than seven times the entire state budget of Iowa, New Hampshire and South Carolina combined.
• Abuse of tax havens forces individual taxpayers and small businesses to pick up the tab. A PennPIRG study last year showed that the amount shouldered by each American tax filer averages to about $434 last year. (Source: http://pennpirgorg.live.pubintnet-dev.org/reports/pap/tax-shell-game)
• The actual tax rate paid by individuals or companies that use tax havens may in fact be much lower than reported. Due to lack of strong disclosure laws, tax havens can effectively hide income in ways which may be completely legal.
• The more U.S. business profits depend on tax havens, the less companies compete based on their efficiency or innovation with goods and services. America cannot rebuild its economy around competitive tax avoidance.
• Use of offshore tax havens is a national security issue because shadow funds can finance terrorism and organized crime. This is one reason why numerous law enforcement organizations support greater disclosure of tax haven information.
• Due to the size of the U.S. economy, the American government has a unique ability to stop abuse of offshore tax havens. No significant financial player can afford to disobey U.S. financial laws if non-compliance might interrupt their ability to transact with U.S. banks and markets.

The "Dirty Thirty" Corporations that Spend More on Lobbying than Taxes

Taxes and democracy are two oft-maligned activities that Americans dearly depend on. "Indeed it has been said," noted Winston Churchill, "that democracy is the worst form of government except all those other forms that have been tried from time to time." He might just as easily have been talking about the responsibility of paying taxes.

Two years ago the Supreme Court's misguided Citizens United decision struck down long-standing Congressional limits on the political power of large corporations by vastly expanding the legal metaphor that "corporations are people." Now there is fresh evidence that corporate influence over Congress makes it easy for those same corporations to avoid their civic duty of paying taxes.

A new report identifies thirty Fortune 500 corporations that pay less in federal income taxes than they spend on federal lobbying.

You read that right. These companies - dubbed the "Dirty Thirty" - exploited loopholes in the tax code so aggressively that all but one of them enjoyed a negative tax rate over the three year period of the study, while together spending nearly half a billion dollars to lobby Congress on issues including tax policy. Instead of paying for the public structures such as roads, police and education which make their profits possible, they collected $10.6 billion in tax rebates from the federal government. Had these thirty companies paid the statutory 35 percent corporate tax rate, the Treasury would have collected an additional $67.9 billion.

Every dollar in taxes avoided by these Fortune 500 companies is a dollar that must be cut from public programs, added to the national debt, or paid in the form of higher taxes by ordinary taxpayers.

The companies in the Dirty Thirty include household names like General Electric, Verizon, Mattel, Wells Fargo, Dupont and FedEx. There's no avoiding how the story at each of these companies represents a mockery to both our tax system and our democracy.

Third and State This Week: Closing Loopholes, a Flawed School Vouchers Plan and More

This week, we blogged about closing tax loopholes on Tax Day, a deeply flawed school vouchers plan in the state Senate, Governor Corbett's claims about property taxes in Texas, and much more.

IN CASE YOU MISSED IT:

'Close the Tax Loopholes' Day

Today is Tax Day, but perhaps we should rename it "Close the Tax Loopholes Day." That is the message delivered by Sharon Ward, Director of the Pennsylvania Budget and Policy Center, in an op-ed in Friday's edition of The Pittsburgh Post Gazette. Here's a highlight:

Many Pennsylvanians will grumble this week as they race to file their tax returns on time. Others will be laughing all the way to the bank.

Take General Electric, the nation's largest corporation. You would expect G.E. to have a pretty sizeable tax bill, right? Think again.

Despite worldwide profits of $14.2 billion (including $5.1 billion in U.S. profits), G.E. owed Uncle Sam nothing in federal taxes. In fact, the company got $3.2 billion back in tax benefits.

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