Thoughts on the corporate tax code
American companies and their lawyers have become experts at avoiding paying their fair share of taxes. For example, Burger King made news today for negotiating a deal with the Tim Hortons coffee-and-donut chain that would move Burger King’s domicile to Canada, which has lower overall corporate taxes than the United States. This and other types of tax avoidance strategies cost state and federal governments billions of dollars in lost receipts — money that could otherwise be used to pay for roads, schools, health care and other vital public services.
Some people argue that the corporate tax code cannot be salvaged and should simply be abolished in favor of higher income taxes on corporate shareholders. But this plan has multiple drawbacks. As the Center on Budget and Policy Project’s Jared Bernstein explains:
The corporate tax is an important balancing mechanism in an era of great inequality. According to the Congressional Budget Office, about 80 percent of corporate income is held by households in the top fifth of the income scale, and about 50 percent is held by the top 1 percent. Unless we could replace it with higher taxes on those same households — a daunting proposition, as I’ll show in a moment — scrapping or even just lowering the corporate tax rate would increase after-tax income inequality.
Bernstein adds that this proposal could turn the corporate structure into its own tax shelter, since everyone would structure their earnings as tax-free corporate income. Additionally, Bernstein questions whether the proposal would raise enough revenues to replace the billions in corporate tax revenue collected last year — and who will bear the burden of making up the lost revenue.
While there is no silver bullet, The Town Talk columnist Catherine Rampell writes that one potential solution is to require all public companies to release their tax returns:
“This is not a new idea. When the modern federal corporate income tax was introduced in 1909, it came with a requirement to disclose the returns. Such transparency mandates were fought over bitterly for the next couple of decades, and U.S. returns have been confidential since 1935. The basic rationale behind tax transparency is that shareholders (and creditors and the general public) deserve to know what publicly traded companies are doing, particularly if complicated tax acrobatics are distorting their operational and investment decisions.”
Constitutional Amendment could cripple state budget
A proposed constitutional amendment on this fall’s election ballot could cripple the state’s ability to pay for home- and community-based services that allow the elderly and people with disabilities to stay in their homes and avoid institutions like nursing homes. Stephanie Patrick of The Advocacy Center told the Lake Charles American Press that Constitutional Amendment 1 would lock up funding for nursing homes, pharmacies and group homes, which would leave other parts of the state budget more vulnerable during economic downturns.
“She said the amendment could dramatically affect the lives of hundreds of thousands of people with disabilities, especially the more than 45,000 residents in the state waiting for services in their homes. ‘It is clear that this amendment will deny basic civil rights to thousands of individuals with disabilities in Louisiana, who want to remain in their homes and communities, but who will be forced to do without needed care, or get it in segregated institutional settings,’ she said.
Kiplinger says Louisiana is a low-tax state; cites low property taxes
Personal finance forecaster Kiplinger released its state-by-state guide to taxes on Monday, ranking Louisiana the third most tax-friendly state in the nation. Louisiana’s average state and local sales taxes are the third highest in the country — 8.89 percent — and can reach as high as 10.75 percent in some places. But Kiplinger says, “The Pelican State’s personal income tax rates are low. Property taxes are among the lowest in the nation, and assessments are based on 10 percent of the fair market value.” Kiplinger also notes that the state does not have an inheritance tax, estate tax or tax on Social Security benefits.
OGB Board member defends cuts to state health plans
Insurance executive Scott McKnight recently joined the policy and planning board of the state Office of Group Benefits. He had read some of the bad publicity that has followed the health plan for state employees, but was so impressed by what he found that he decided to write an op-ed in The Advocate.
“What I didn’t expect was to hear about an organization that was streamlining processes, becoming more efficient and acting more like an employer rather than an insurance company. By doing so, it is now offering some extremely comprehensive and affordable plans that have set up OGB to offer great benefits for years to come.”
Left unsaid in the editorial, but which bears repeating, is the sobering report from the nonpartisan Legislative Fiscal Office, which explained what “comprehensive and affordable” really means for state workers and retirees: Higher co-pays, higher deductibles, fewer choices in prescription drugs and higher out-of-pocket costs when you get sick and need hospitalization.
Quote of the Week
“As far as I’m concerned, Act 859 represents a Great Dane-sized whiz down the leg of the taxpayers.”
-State Treasurer John Kennedy, in Nola.com, referring to a new law that gives State Police Superintendent Mike Edmonson and one other trooper a substantial boost in retirement benefits. The law was passed with no public debate in the waning hours of the legislative session.
Number of the Day
47 — Louisiana’s ranking for best workplace environment for women by Wallet Hub. Louisiana also ranked 41 for women’s political empowerment. (Source: Wallet Hub)