Category Archives: Taxation

As American as Apple Inc.: International Tax and Ownership Nationality

Source: Chris William Sanchirico, University of Pennsylvania Law School, Public Law Research Paper No. 14-5, February 11, 2014

From the abstract:
The ownership nationality of large US multinational companies plays an implicit but important role in the current debate over how such companies should be taxed. This paper identifies that role and investigates what is actually known about where these companies’ shareholders reside.

Subsidizing the Corporate One Percent: Subsidy Tracker 2.0 Reveals Big-Business Dominance of State and Local Development Incentives

Source: Philip Mattera, Good Jobs First, February 2014

From the abstract:
As a result of substantial enhancements we have made to our Subsidy Tracker database, it is possible for the first time to estimate the share of total state and local economic development awards going to the largest corporations.This report summarizes the findings.
Subsidy Tracker 2.0 database
Top 100 Parents
Press Release

The Sorry State of Corporate Taxes: What Fortune 500 Firms Pay (or Don’t Pay) in the USA And What they Pay Abroad — 2008 to 2012

Source: Robert S. McIntyre, Matthew Gardner, Richard Phillips Citizens for Tax Justice and the Institute on Taxation and Economic Policy, February 2014

From the summary:
Many of America’s Most Profitable Corporations Pay Little or No Federal Income Taxes; Multinationals Pay Higher Rates Abroad Than in the U.S.

“Corporate lobbyists incessantly claim that our corporate tax rate is too high, and that it’s not ‘competitive’ with the rest of the world,” said Robert McIntyre, Director of Citizens for Tax Justice and the report’s lead author. “Our new report shows that both of these claims are false. Most of the biggest companies aren’t paying anywhere near 35 percent of their profits in taxes and far too many aren’t paying U.S. taxes at all. Most multinationals are paying lower tax rates here in the United States than they pay on their foreign operations.”
– 111 of the companies enjoyed at least one year in which their federal income tax was zero or less.
– 26 companies, including Boeing, General Electric, and Verizon, enjoyed negative income tax rates over the entire five-year period, despite combined pre-tax profits of $170 billion.
– Of the 125 multinational companies in this sample, two-thirds paid a lower U.S. tax rate than the rate they paid to foreign governments on their foreign profits. On average, their foreign effective tax rate was 12 percent larger than their U.S. effective rate. …
Executive Summary
Press Release
Download the Corporate Data (XLS)(Right-Click and Save-as)

The States Taking on Real Tax Reform in 2014

Source: Citizens for Tax Justice, February 11, 2014

Note to Readers: This is the fifth post of a five-part series on tax policy prospects in the states in 2014. Over the course of several weeks, The Institute on Taxation and Economic Policy (ITEP) highlighted tax proposals that were gaining momentum in states across the country. This final post focuses on progressive, comprehensive and sustainable reform proposals under consideration in the states.

State tax policy proposals are not all bad news this year. There are some promising efforts underway that would fix the structural problems with state tax codes and improve tax fairness for low- and middle-income families. All eyes are on Illinois as lawmakers grapple with how to raise much needed revenue after their temporary income tax hike expires. Many are hoping the timing is now right for a real debate about a graduated income tax. Washington DC’s Tax Revision Commission has proposed a number of sensible reforms. And, lawmakers in Hawaii and Utah are expected to seriously debate ways to improve their states’ tax fairness. …

The Corporate Income Tax System: Overview and Options for Reform

Source: Mark P. Keightley, Molly F. Sherlock, Congressional Research Service, CRS Report for Congress, R42726, February 14, 2014

…. This report discusses a number of economic considerations that may be made while evaluating various corporate tax reform proposals. These might include analyses of the likely effect on households of certain reforms (also known as incidence analysis). Policymakers might also want to consider how certain corporate tax provisions contribute to the allocation of economic resources, choosing policies that promote an efficient use of resources. Other goals of corporate tax reform may include designing a system that is simple to comply with and administer, while also promoting competitiveness of U.S. corporations. …

Inequality in America: Challenges for Tax and Spending Policies

Source: Eric M. Zolt, UCLA School of Law, Law-Econ Research Paper No. 14-02, January 27, 2014

From the abstract:
The goal of this article is to provide a guide to addressing tax and spending policies in an era of increasing inequality of income and wealth. This is challenging because it requires a good understanding of inequality and economic mobility, the changing role of taxes and government social spending, the constraints on policy options, and the possible misconceptions that may influence tax and spending policies.

Inequality in the United States has increased dramatically over the last 30 years. Perhaps even more troubling than the rise in inequality may be the persistence of high levels of poverty and the decline in economic mobility. The same thirty-year period during which inequality has increased, poverty levels have not declined, and economic mobility has decreased has seen major changes in fiscal policy. Tax law changes have altered the relative tax rates, the relative revenue contributions from different tax instruments, and the tax burdens of different income groups. Government spending on social programs has increased substantially, but perhaps not in ways one might expect. The United States likely has a smaller percentage of government social spending going to the needy than other developed countries. In recent decades, an increasingly larger percentage of social spending has been directed to the elderly (without regard to need) and to the upper-half of the income distribution through tax subsidies for healthcare, education, housing, and retirement savings.

The essential first step in shaping fiscal policy is to identify clearly the relative priorities among reducing inequality, reducing poverty, and increasing economic mobility. Tax and spending policies will differ depending on the weight given each of these objectives, and especially in a world of relatively limited resources, the government needs to make difficult choices. Perhaps the most significant implication of this reality is that it may be time to stop thinking about increasing the income tax burden on the wealthy as the only, or perhaps even the primary, way to increase funding for social spending programs. The United States may need less progressive (or even regressive) taxes to fund more progressive spending programs.

Property Taxes and Their Limits: Evidence from New York City

Source: Andrew T. Hayashi, Virginia Law and Economics Research Paper No. 2014-04, February 2014

From the abstract:
I report evidence from New York City that property assessment caps on small residential properties represent a significant tax benefit that accrues to the most valuable properties and the wealthiest neighborhoods. Moreover, rather than benefiting the long-time homeowners on fixed incomes who are their putative targets, the largest benefits go to the properties that are most likely to have been recently sold and to be located in neighborhoods where cash incomes have increased the most.

An Economic Analysis of the Adoption of Right-to-Work On Missouri Families

Source: Michael P. Kelsay, Department of Economics, University of Missouri-Kansas City, February 10, 2014

The attempt to pass right-to-work legislation in the State of Missouri is based ostensibly upon the claim that such legislation will increase income, job formation, and business formation in the state. My report shows that the movement to a right-to-work state from a free-to-bargain state for Missouri would result in significant economic losses to Missouri families and taxing jurisdictions. My report further shows that the experience to date is that free-to-bargain states perform uniformly better than right-to-work states across a wide range of socio-economic variables.

• The movement to a right-to-work state from a free-to-bargain state in Missouri would result in a combined direct and induced economic loss to households in Missouri between $1,945 and $2,547 annually per household.
• The movement from a free-to-bargain state to a right-to-work state would cost Missouri workers and their families between $4.58 billion and $6.0 billion annually in lost income as a result of lower wages.
• The movement from a free-to-bargain state to a right-to-work state would cost the state, counties, and local jurisdictions between $82.14 million and $107.56 million annually in lost sales tax collections as a result of lower wages.
• The movement from a free-to-bargain state to a right-to-work state would cost Missouri between $137.28 million and $179.89 million annually in lost state income taxes as a result of lower wages.
• The total economic loss due to movement from a free-to-bargain state to a right-to-work state would cost Missouri workers, families, and taxing authorities between $4.8 billion and $6.28 billion annually in lost wages, state, county, and local sales taxes, and income taxes as a result of lower wages…

What Cities Really Need to Attract Entrepreneurs, According to Entrepreneurs

Source: Richard Florida, Atlantic Cities, February 11, 2014

Creating high-growth, high-impact entrepreneurial enterprises has become a common goal of cities. Metros and states have cut taxes, implemented entrepreneur-friendly business policies, launched their own venture capital efforts, and underwritten incubators and accelerators – all in the hope of creating the next Apples, Facebooks, Googles, and Twitters.

But what really attracts innovative entrepreneurs who create these economy-boosting companies?

The answers: talented workers, and the quality of life that the educated and ambitious have come to expect – not the low-tax, favorable-regulation approach that many state and local governments tout.

These are the findings in a new report from Endeavor Insight, the research department of the non-profit Endeavor, which focuses on fostering and mentoring “high-impact” entrepreneurs. Based on surveys and interviews with 150 founders of some of the country’s fastest-growing companies, the report answers the basic question, “what do the best entrepreneurs want in a city?” It offers basic evidence that cities should focus on factors and conditions that attract the talented, educated workers that fast-growing entrepreneurial enterprises need….

The study found that two other key factors in the location choices of entrepreneurs are major transportation networks (like airports and highways that can connect them to other cities) and proximity to customers and suppliers. …

Perhaps even more interesting from the perspective of urban policy are the location factors that did not make the cut – those that high-growth entrepreneurs found to be of little consequence in their location decisions. At the very bottom of the list were taxes and business-friendly policies, which are, unfortunately, exactly the sorts of things so many states and cities continue to promote as silver bullets. Just 5 percent of the respondents mentioned low taxes as being important, and a measly 2 percent named other business-friendly policies as a factor in their location decisions. …

See also:
What Do the Best Entrepreneurs Want in a City? Lessons from the Founders of America’s Fastest-Growing Companies
Source: Endeavor Insight, February 2014

Putting State Pension Costs in Context: How They Compare To The Cost Of Corporate Subsidies, Tax Breaks And Loopholes

Source: Good Jobs First, January 2014

From the press release:
State lawmakers who are considering drastic cuts to the retirement benefits of state workers are simultaneously giving away billions of dollars in corporate tax subsidies and loopholes, often in amounts far exceeding the cost of pensions, according to a new report.

Putting State Pension Costs in Context by Good Jobs First examines 10 states where elected officials are threatening to undermine retirement security by cutting the pension benefits of their teachers, firefighters, police officers, and hundreds of thousands of other public employees. The states included in the report are: Arizona; California; Colorado; Florida; Illinois; Louisiana; Michigan; Missouri; Oklahoma; and Pennsylvania.

The findings show that in each state, the revenue lost to corporations through loopholes and tax breaks outpaces the current cost of pension benefits to state employees….

National summary

Pennsylvania Pension Fact Sheet
Source: Stephen Herzenberg, Keystone Research Center, February 3, 2014