In this Dispatch, we will examine the need for corporate transparency, recent cases relating to the subject, and how the policy will benefit states dealing with massive deficits.
At the basic level, people deserve to know how businesses that benefit from public contracts, subsidies, or tax expenditures are spending tax dollars. Lawmakers must make sure that these businesses are creating jobs, saving the state money, and best serving the public interest. To foster a more targeted budget process, increase efficiency, and allow for future savings, states must adopt more stringent corporate disclosure and transparency legislation.
Problems due to lack of transparency in subsidy distribution, contract allocation, and hidden tax breaks are well-documented. Almost every week there is a story relating to states distributing subsidies with little to nothing to show for it, failing to save money from utilizing contractor services rather than state employees, and providing huge tax breaks to large corporations that often do not reflect the greater public interest. As well, states have been losing millions of dollars from declining corporate tax revenue. As a percentage of total state tax revenue, the corporate income tax has dropped significantly.