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Making Corporations Pay Their Fair Share

Privatization Update: Recent News from across the Country

As states face mounting deficits, corporate lobbyists have been promoting the idea that privatization of public services and assets is a free lunch -- services can be delivered more cheaply than by public employees and public assets like highways can be sold or leased for a hefty return to the taxpayer.  As PSN has detailed in our December 2007 report Privatizing in the Dark: The Pitfalls of Privatization & Why Budget Disclosure is Needed, the promises of privatization too often yield to a reality of lost money and degraded services, weak oversight and lost expertise, assets sold off for short-term gains but long-term loss, lost democratic accountability, and the corruption of the political process.

Overview on Stopping Rightwing Tax Campaigns

For decades, property tax revolts have been a thorn in the side of progressives.  California's Proposition 13 remains the highest profile example of the property tax revolt, but just about every legislator in the country can attest to the level of frustration many Americans feel about property taxes. 

  • Progressives can begin to challenge property tax caps by simply presenting research showing the regressive nature of property tax caps in a compelling way. 
  • They also need to fight the rightwing promoting one of the most disastrous tax policies in recent decades, namely variations on Colorado'sso-called Taxpayer Bill Of Rights (TABOR) which created a rigid cap on increases in state spending tied to inflation and economic growth, decimating the state's investments in education, health care, and social services.
  • One other dangerous form of tax limitation laws are rules that require supermajorities to pass any tax increase.  In such cases,  special interests may be able to enact a tax break for themselves with a simple majority, but then can often block repeal of the tax loophole as a "tax increase" that can be blocked by a minority of legislators  

Overview

While some lost tax revenue is due to loopholes and manipulation, another tax drain is straight-up tax cheating by corporations and individuals.  States are responding with a variety of strategies for catching these tax cheats and recovering this lost revenue:

Cracking Down on Abusive Tax Shelters: A 2001 Multistate Tax Commission report estimated that tax shelters designed to illegally evade taxes cost states as much as $12 billion per year.  Facing the largest losses in the nation, California pioneered legislation requiring new reporting on the details of suspicious shelters, enacting heavy fines for using illegal shelters, and creating an amnesty program to promote voluntary compliance.  The amnesty program brought in a cascade of revenue: over $1.4 billion from 1,202 taxpayers, or an average payment of over $1 million per taxpayer, reflecting the widespread tax cheating among this wealthy population.  Other states are following suit.

Multi-State Collaboration: Going beyond the occasional cooperation between state auditors, eight states, led by Massachusetts, created a new multi-state agreement to share data in a project called the Clearinghouse, which will compare information on people who work in one state and earn income in another in order to reveal tax cheating.

Shaming Tax Cheats: To encourage payment by delinquent taxpayers or those caught violating the law, more than a dozen states have begun publishing lists of businesses and individuals owing taxes on the Internet.  Connecticut pioneered this high-tech shaming strategy in its Top 100 list, which collected more than $161 million in overdue tax debts over its first seven years.  Other states have been collecting similar amounts with their own programs.

Overview on Making Corporations Pay Their Fair Share

By taxing corporate owners, an effective corporate income tax has two large advantages for states: the majority of owners are in the richest 1% of the population, and many are not state voters. Corporate income taxes are often the main tax that out-of-state corporations and their shareholders pay for the public benefits enjoyed by their companies.

One reason social services face funding crises is that state corporate income tax revenues have dropped from 9.7% of all state taxes in 1980 down to just 5.7% by 2000. States are increasingly using a variety of tools to have corporations pay their share, including

  • Combined Reporting: States are increasingly requiring companies to use combined reporting, listing profit reports for all subsidiary companies together on state tax forms to prevent shell games where companies hide profits through phony transactions among different corporate entities.
  • Decoupling: States can save revenue by refusing to automatically grant special interest tax breaks handed out by the federal government --"decoupling" their tax code from the feds.
  • Oil windfall taxes: A number of groups have advocated state Windfall Profits Taxes to capture the outsized oil company profits.

Overview

In a debate too often dominated by rightwing tax cut rhetoric, there is a real opening for progressives to demand a fairer, more accountable tax and budget system.  The public has a strong commitment to funding both social services and the long-term investments needed for economic growth, but state residents are frustrated by governments that they believe tax low- and middle-income residents too much and upper-income residents and corporations too little.  Hidden economic giveaways to companies receiving tax breaks and government contracts only add to voters' suspicion that state budgets serve those with money, not the average taxpayer.  In response, a range of reforms at the state level are creating more transparent tax and budget decisions and strengthening voters' trust that their tax money will actually go towards the important public services that they do support.  These approaches include:

Building a Progressive Majority in the States, 2008

On Monday, July 22nd, over one hundred and fifty state legislators, labor leaders, and advocates participated in "Building a Progressive Majority in the States," a joint annual meeting of the Progressive States Network and the National Labor Caucus.  Taking a cue from the opening plenary on progressive policies for an economic downturn, the conference focused on strategies for confronting the most important issues facing America's working families, including affordable health care, smart immigration policy, workers' rights, green jobs, clean energy, and tax and budget reform.  To address these issues in more depth, PSN policy experts joined state legislative leaders in smaller workshops that gave participants a chance to share best practices and model legislation while developinglegislative priorities and winning strategies for 2009.

OVERVIEW

As states face another economic downturn and growing budget deficits, expanding access to coverage may seem like an impossible goal.  However, there are steps states can take to generate revenue and "stretch" health care dollars to ensure access to health care.  These include using existing tobacco-settlement dollars dolely for health care, instituting employer pay-or-play requirements, improving prescription drug purchasing, improving chronic care management, and ending corporate tax loopholes.

2008 Session Roundups: Kansas

Gridlock on the top issues dominated Kansas’ legislative session and prevented movement on most significant legislation.  This generally played out to progressives favor as the legislative majorities top priorities for the session were misguided immigration policies and granting permits for two coal-fired power plants that the executive branch had previously denied.

2008 Session Roundups: New Hampshire

Lawmakers made notable gains on several fronts, with new progressive leadership elected in 2006 making good use of their positions:

Health Care: Lawmakers enacted the HealthFirst initiative (SB 540) requiring insurers to offer a standard "wellness plan" to small businesses with targets for premiums to be priced at 10% of the previous year's state median wage, roughly $262 per month.  The plan will cap a person's out-of-pocket medical expenses and seeks to achieve cost savings by emphasizing preventive measures that are typically available only to large businesses.  The legislation also outlaws insurers from developing competing plans designed to undercut the new program.  

2008 Session Roundups: Minnesota

With a last minute deal to close a billion-dollar deficit, Minnesota had a good session that would have been a landmark one -- if the Governor had not vetoed more bills (34!) this session than in any other since World War II.