[Futurework] And the other shoe drops

[Karen Watters Cole]

More evidence for change in policy that caters to Big Corporations for jobs and economic development.  To see the report, go to: http://www.mtc.gov/statebudgetcrisis.html   Excerpts: Business Tax Shelters a Drain on States' Finances, Study Says By David Cay Johnston, NYT, Wednesday July 16, 2003 @ http://www.nytimes.com/2003/07/16/business/16TAX.html   Tax sheltering has cost states more than a third of their revenue from taxes on corporate profits, a new study showed yesterday, adding to the severe strain on state finances across the country.   The states lost as much as $12.4 billion because of tax sheltering in the 2001 fiscal year, the Multistate Tax Commission, an organization of taxing authorities in 45 states, reported. Its low estimate was $8.3 billion.   In the 1980's, 9 percent of corporate profits were paid to states. This number had declined to less than 6 percent by 2001, the study showed.   "Some large, sophisticated companies are using sheltering devices, aggressive restructurings and other steps to avoid paying taxes at the state level," R. Bruce Johnson, the Utah tax commissioner, said. "A third of these resources are dropping off the radar because aggressive companies are availing themselves of tax planning strategies that are not available to smaller companies or to individuals, and the result is unfair to the vast majority of taxpayers."   Corporate tax shelters, the study concluded, are reducing the ability of states to provide for education and other basic needs and are "undermining the equity and integrity of state tax systems." The report did not name any companies.   The study was released at a gathering in Sacramento to examine corporate tax shelters and their effect on state finances. California's financial problems have caused it to borrow billions of dollars to pay its expenses, one of the main issues in a drive by Republicans in California to recall Gov. Gray Davis, a Democrat. The study indicates that corporate tax sheltering explains about 3 percent of the $38 billion budget deficit in California.   2… The study also examined the effect of using those techniques at the international level, which reduces federal tax revenues.  Martin A. Sullivan, a former Treasury Department economist, has written in the magazine Tax Notes that these same techniques on the international level are costing the federal government about $30 billion. The states collect a fifth as much in corporate taxes as the federal government; the study relied on Mr. Sullivan's work to estimate that the states lost $5.3 billion in 2001 because of international tax shelters. (end of excerpts).  The New York Times     As your local paper may have, The Oregonian also covered this story with their own reporter and provided this table for the percentage lost in potential revenue.  Note that Florida, one of two US states most favored by Big Business for tax purposes, is listed in the top three on this table.  Just to the left of this 'above the fold' article in the Business section, under Today's Business Briefs/Topic of the Day it said Washington's jobless rate hits 7.7 percent.  In Oregon, of course, the June rate went to 8.5 percent, the highest in 17 years.  Do you think people are making any connections?  - KWC   Revenue in Millions State Actual Lost Percent Difference 1. W. Virginia $113 $65 57.8 2. Ohio 663 378 56.9 3. Florida 1,138 554 48.7 4. Mississippi 203 88 43.4 5. Vermont 45 19 42.2 6. S. Carolina 192 80 41.7 7. Connecticut 413 172 41.7 8. Louisiana 293 122 41.6 9. Tennessee 673 280 41.6 10. Indiana 825 343 41.6 Ted Mitchner/The Oregonian Excerpts from the Oregonian’s coverage:  (http://www.oregonlive.com/business/oregonian/index.ssf?/base/business/1058357531275640.xml) 1…"The Multistate Tax Commission defines tax shelters as push-the-envelope techniques that take advantage of structural weaknesses and loopholes in state corporate tax systems. It does not include tax credits or other state-enacted tax policies in the tally." 2...Most companies keep separate books for financial and tax reporting purposes. The gap between income reported to shareholders and taxable income reported to the IRS hit $155 billion in 1998, according to a Harvard Business School study.  Tim Nesbitt, head of the Oregon AFL-CIO and an advocate of corporate tax reform, argues that corporations should pay taxes based on profits to shareholders.  By that measure, he said, the calculations in the commission report "are just the tip of the iceberg." Nesbitt said. (end of excerpts)

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