Voters in 36 states will be choosing governors this November. Over the next several months, the Tax Justice Digest will be highlighting 2014 gubernatorial races where taxes are proving to be a key issue. Today’s post is about the race...
Just when it seems the case for bonus depreciation cannot get any weaker, now business leaders have admitted that it has no effect on investment. A new survey from Bloomberg BNA confirms the CRS's finding that the expiration of bonus depreciation is hardly ruffling a feather among most Fortune 500 corporations. BNA surveyed 100 leaders at large U.S. businesses to find out how, if at all, changes in bonus depreciation and related tax rules are affecting their decisions on capital expenditures, and found that 83 percent of these business leaders believed the expiration of these tax breaks has not affected their capital expenditures in 2014.
You'd have to be living under a rock at this point (or mysteriously uninterested in tax policy - but then why would you be reading this) to not know about the fiscal crisis in Kansas. This recent USA Today article (which quotes smart folks at Missouri Budget Project and the Kansas Center for Economic Growth) does a really splendid job of relaying the absolute latest happenings in Missouri and Kansas (sneak peek - Missouri may be a little better off because their tax cuts are dependent on revenue growth, and Kansas has just gotten a fiscal vote of no confidence from another bond rating agency).
According to the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), an estimated $7 and $10 billion is lost in federal and state tax revenue annually due to cigarette smuggling, which is astounding considering that total federal and state tobacco tax collections were about $32 billion in 2013. This means that as much as a quarter of all tobacco tax revenue is being lost each year.
What's the biggest difference between small and large cigars or pipe and roll-your-own tobacco? Their level of taxation, according to the Government Accountability Office (GAO), which estimates that tobacco companies have managed to dodge an estimated $3.7 billion in federal excise taxes since 2009 by superficially repackaging their products to fit within the legal definitions of the least taxed forms of tobacco.
While Congress's attention has been riveted on the saga of a handful of corporations making high-profile attempts to invert to foreign countries, Microsoft's recent announcement that it's holding a staggering $92.9 billion offshore is a stark reminder of the far more consequential tax avoidance practiced by Fortune 500 companies that remain based in the United States.
Microsoft admits in its SEC filings that it would owe more than $29.6 billion if it paid taxes on the cash it's stashing offshore. The past year, Microsoft moved $16 billion offshore, which is more than the total amount the much-maligned inverter Medtronic currently holds abroad. Only General Electric and Apple disclose having more offshore cash than Microsoft.
Yesterday voters in Missouri soundly defeated Amendment 7, a ballot measure that would have raised the sales tax by three-fourths of a cent to fund transportation needs. Sales taxes are largely regressive, capturing a larger share of income from the poor than from more affluent people. The move to temporarily raise the state sales tax to pay for roads and bridges comes just months after the state legislature overrode Gov. Jay Nixon's veto and passed income tax cuts that overwhelming benefit high-income taxpayers.
The vote defeating the sales tax increase sends a message to lawmakers to go back to the drawing board in terms of finding ways to pay for needed infrastructure. Lawmakers projected the new sales tax to generate $5.4 billion over ten years for transportation projects across the state. Now that the sales tax hike has been defeated critical work won't begin on the more than 800 projects the Missouri Department of Transportation identified as "critical safety improvements."
The outcome of the Governor's race in Illinois will have major- and immediate- implications on the state's ability to provide adequate funding for education, health care, transportation and other important services. The context for this heated race is especially important. The state currently has one of the nation's most regressive tax systems, applying the same income tax rate to minimum wage workers and millionaires. To make matters even worse, the state's temporary 5 percent income tax rate is set to fall to 3.75 percent in January leaving the state with a $2 billion budget gap.
Short of cash, you decide to rob a bank at gunpoint. But on your way out the door, the cops arrest you. You say, "Sorry about all this. I'd sure appreciate it though if you let me keep the money." Fat chance. But for big multinational corporations that are caught stealing from the U.S. Treasury, letting them keep the money seems to be exactly what Republicans in Congress favor.
In another defection from the corporate income tax base, last Tuesday Windstream Holdings, Inc. announced that it will be spinning off part of its telecommunications assets into a Real Estate Investment Trust (REIT) after it recently received a Private Letter Ruling (PLR) from the IRS approving the transaction. The company, whose 5-year effective federal income tax rate for 2008-2012 was already a paltry 11 percent, will be able to lower its tax rate even more through use of the REIT.
A REIT is to real estate what a mutual fund is to stock and bonds: a way for smaller investors to diversify their holdings by owning a share of a large pool of assets rather than owning individual stocks or properties directly. A REIT, just like a mutual fund, doesn't pay an entity-level tax. Instead it distributes its income to the REIT shareholders who pay tax on their respective shares.