I Want Climate Change
Chuck Sheketoff
I want climate change.
No, I’m not talking about an increase in Earth’s temperature that would melt the polar ice caps.
I’m talking about a change in the political climate in Oregon that would melt lawmakers’ reluctance to reform our corporate tax system — change that would fulfill Oregonians’ desire to see large corporations doing business here pay their fair share in taxes.
Oregon's corporate income tax system is broken. It’s so riddled with loopholes that big corporations today are paying about half of the income taxes, as a share of their profits, that they paid in Oregon a generation ago.
The number of large profitable corporations paying the minimum tax (almost two out of three) is the miners’ canary of a broken tax system. More than 5,000 profitable corporations operating in Oregon paid no income taxes in 2006 beyond the $10 minimum, and 31 of those freeloaders had more than $1 million in Oregon taxable income.
The best test for whether reform has succeeded is whether profitable Intel has returned to its former role of number one corporate taxpayer, contributing $50 million a year for Oregon’s public services. Right now Intel’s tax liability is so low they are selling their tax energy credits.
Lawmakers have yet to meaningfully discuss why our broken tax system enables large companies to get away with paying so little in income taxes as a share of their profits. And the corporate loophole lobby wants nothing more than to deep freeze that debate.
But here’s how to warm things up: corporate disclosure. By giving the public more information about the tax liability of large corporations, the political climate would change and the legislature would be compelled to address the issue.
Disclosure would require large corporations — those that are publicly traded, financial corporations, large employers (say, 250 or more employees) and those with sales in the millions — to file a report with the Secretary of State of their total US income, their total income subject to Oregon taxes, and their final tax liability after using all tax breaks like income tax credits. Small businesses and personal service corporations would be exempt.
By itself disclosure will not change Oregon’s corporate tax laws. But once Oregonians learn how Oregon's tax system does not treat all corporations fairly and allows many profitable corporations to pay less in income taxes than what families pay, the movement for a equitable corporate tax reform will reach a boiling point. That’s why the corporate loophole lobby opposes disclosure.
Disclosure would help, not hurt, Oregon's business climate. Just as federal disclosure to the Securities and Exchange Commission promotes confidence in corporate America, state disclosure would be salutary for Oregon's business climate. It would show that companies can operate here and make a profit, and it would allow Oregonians to identify and acknowledge the good corporate citizens who don’t shirk their tax obligations.
No one has yet come up with an example of potentially damaging information or trade secrets that corporate disclosure of tax liability would reveal. The measure would merely require reporting of yesterday's information tomorrow. That is neither a trade secret nor proprietary information that would aid a competitor. That is why Intel, a business in a highly competitive industry, in the past (when it was the foremost corporate taxpayer) voluntarily disclosed how well it supported public services through the income tax.
The time has come for all corporations to pay their fair share. That’s the change that Oregonians want. Corporate disclosure would create the climate change to bring it about.
Chuck Sheketoff is the executive director of the Oregon Center for Public Policy. You can sign up to receive email notification of OCPP materials at www.ocpp.org
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Jun 1, '09
"The time has come for all corporations to pay their fair share"
Corporate taxes are paid by people not corporations. Corporations never pay taxes they embed that cost into the product/service they provide and that gets passed down to the people that consume the products/services.
So, in essence, you are saying Oregonians don't pay enough in taxes.
Jun 1, '09
Todd,
I'll make you a deal. I'll agree to support ending taxing corporations if you agree to support ending corporate personhood -- their ability to shield themselves behind limited liability.
3:02 p.m.
Jun 1, '09
Todd - that's Econ 101.
Econ 102 of course teaches us that the final tax incidence depends on the various elasticities of supply and demand. Actual evidence demonstrates some companies have more profit and end up having to pay some of the taxes out of profits.
Jun 1, '09
Profits are an interesting thing to discuss. Where do corporate profits go?
They go to reinvesting in the company(producing more products by investing in capital/hiring more workers), they go to employees in the form of higher wages, and/or they go out in dividends to shareholders.
You can never truly tax a corporation. No matter how hard you want to make a corporation pay its 'fair' share and stick it to the 'greedy' corporation, you won't. It is people who work at the corporation. It is people who get paid by the corporation. It is people who pay for the products produced by the corporation. It is people who invest in and recieve dividends from the corporation. It is people who get advantages from corporations producing a product that people value. Corporations are people!
You are taxing Oregonians with increases in corporate taxes!
Jun 1, '09
Corporate taxes are paid by people not corporations. Corporations never pay taxes they embed that cost into the product/service they provide and that gets passed down to the people that consume the products/services.
So, in essence, you are saying Oregonians don't pay enough in taxes.
Todd,
This is a common rationale for not taxing corporations and it sounds perfectly reasonable as long as you don't think about it too strenously. The problem with this argument is that, in the end, almost all taxes are paid by the people that consume the products/services.
Who do you think pays for your payroll taxes, social security taxes, etc. Who pays for excise taxes? Aren't all these taxes passed on to the people who consume the products/services? Of course they are!
The only tax that I can think of that isn't passed on to consumers is the estate tax. So, by your logic, we should fund all government services by the estate tax because it is the only one that isn't "passed on" and get rid of all other taxes.
A huge part of the government exists to support and subsidize big business. Taxes are the cost of providing those services and there's no justifiable reason why corporations shouldn't pay their fair share for the services that government provides.
Jun 1, '09
"It is people who get paid by the corporation."
And we know that CEO's and their hand-picked boards and compensation committees pay themselves, at a rate that is often what, 400 times that of their average worker?
Yes of course, any penny deducted from that compensation they would try to get back by adding it to someone else's expenses or cutting it from someone else's pay, but maybe corporate disclosure would slow down that process a bit.
I read somewhere that unlike the CEO of say, General Motors or Intel, the head of Toyota is paid about one million dollars a year, and is often found on the shop floors talking with workers. And yet Toyota has done ok.
Jun 1, '09
Mike,
It is great that someone understands this concept. You have clearly shown that it is the people that are taxed from taxing corporations.
I am not saying that Oregonians shouldn't be taxed to provide government services. I am saying that it is wrong to say we have to tax 'greedy' corporations to make them pay a 'fair' share. This is a hidden sales tax on Oregonians under the guise of "we will make those greedy corporations pay".
If you want more taxes to pay for government services that's fine (although I think we already spend too much) just do not act like it is punishing corporations to help Oregonians.
I am perplexed by your last paragraph though. You completely understand that taxes get passed down to people. But then you mysteriously continue to say "there's no justifiable reason why corporations shouldnt pay their fair share for the services that government provides."
Jun 1, '09
Isn't it interesting that the more regulated corporations get, the higher the discrepancy between worker and CEO pay becomes. Or is it just coincidence?
5:03 p.m.
Jun 1, '09
Actually, Old Ducker, it's an outright falsehood -- not sure if it is a misconception (I think so from your other posts which seem genuine & good-willed enough though I often disagree) or a deliberate misrepresentation like the oversimplifications offered by Todd.
The vast multiplication of managerial salaries (and it's not just CEOs) relative to ordinary workers has corresponded in time very directly to the period of Reaganite deregulatory policies, as well as the collapse of private sector union density.
The result is that a great disproportion has emerged in the division of increased productivity returned to labor (and actually, to reinvestment) as opposed to self-dealing managerial salaries and shareholder dividends. Investors have been trained to expect historically unrealistically high returns on investment & that in turn has dried up investment in perfectly profitable business activities that provide jobs in favor of cutthroat corporate race to the bottom policies that have hollowed out our real economy.
Jun 1, '09
Climate change... the sooner the better. Just think of how quickly we would return to a sustainable population when the seas obliterate the majority of the world's most populated cities and wash hundreds of miles inland to cleanse the lowlands poisoned with petro-chemicals, when tectonic plates grind ever more violently as the weight of the world shifts (and quite possibly the axis) and volcanoes erupt with increasing frequency. I'm looking forward to it.
Really, this is better than the jew/muslim/christian apocalypse/rapture, except we'll actually get of them.
Jun 1, '09
Chris, I believe an honest discussion of that subject is beyond the scope of posting on blogs. I'll just say that I disagree and would note that current CEO compensation far outweighs that of the nearly non-regulated and semi-unionized age of the "robber barons." There are lots of reasons corporations choose short term returns and de-regulation is not even close to being one of them.
However...when deregulation is combined with other ill-conceived policies such as articially low interest rates and other inflationary policies, disaster will ultimately ensue, as it has.
<- just my $1.00 (the $0.02 equivalent of the 1932 value of 20 dollars to an ounce of gold..I'll have to revise it upward very soon).
Jun 1, '09
Most of the profitable corporations that managed to pay only the minimum did so merely by taking advantage of a tax code rule that allows corporations to apply losses in previous years to future tax years, Leachman said. There were 4,900 such profitable corporate taxpayers using prior year losses.
Oh, you mean the same tax code that allows you to deduct mortgage interest, property taxes, etc from your tax bill.
Some profitable corporations — a total of 216 — used tax credits to shrink their income tax bill to $10, while 40 others used a combination of tax credits and losses from prior years to reach the minimum, the OCPP analyst said.
You mean like the EITC, First time homebuyer, energy efficiency etc, etc, etc. Think of how much tax revenue we would have it those were gone too.
The following are from IRS Form 1120:
28 Taxable income before net operating loss deduction and special deductions. Subtract line 27 from line 11
29 Less: a Net operating loss deduction (see instructions)
b Special deductions (Schedule C, line 20
30 Taxable income. Subtract line 29c from line 28
As you can see, taxable income IS DETERMINED by subtracting OLCF and credits.
Jun 2, '09
Under a very flawed clerk's opinion in 1878? (Grant's administration I think) "corporations" somehow became equivalent as citizens (individuals) in our country. Why do corporations have this right and can beat us taxpayers out of paying a fair share of the state income tax? Ever since I moved to this state in 1992 my state income tax has always been more than ten bucks, and no way to get a mininum tax equivalent...
Jun 2, '09
gnick,
I think it (corporate personhood) was a political football since the founding of the republic, but became enshrined in law after the civil war in interpretations of the 14th amendment. So many of our liberties were lost in the aftermath of that conflict...most have no idea.
5:55 p.m.
Jun 2, '09
Iagree with Chuck but believe that such tax reform will not occur, until after Oregon enforces limits on political campaign contributions. Measure 47 bans all such contributions by corporations but is not being enforced by the Secretary of State or Attorney General. Now that the Illinois and New Mexico legislatures have adopted contribution limits, that leaves Oregon as one of only 2 states with utterly no limits on political contributions.
The other state with no limits is Missouri. Utah is often listed in the press or in compilations as having no limits, but that is not correct. Utah Code 20A-11-1404 bans unions from making political contributions or expenditures using treasury funds. "A labor organization may not expend union dues for political purposes or transfer union dues to a political fund."
To get limits enforced in Oregon, visit http://www.fairelections.net/now
Jun 3, '09
eh... I see the summer rerun season is on here at Blue Oregon. Chuck posts some variant of this column about every 3 months or so.
Last time, public disclosure was necessary so Chuck could (by some authority he evidently decided to invest in himself) 'honor' the 'good' taxpayers... simple compliance with Oregon's tax laws as determined by the OR Dept of Revenue not being enough.
At least Chuck is being more honest this time in admitting that it's really all about politicizing corporate tax return information to demagogue those who don't meet his arbitrary 'fair share' standard... compliance with the tax laws be damned!
Jun 3, '09
Donate your energy to Oregon Money In Politics Research Action Project then. They are a real reformers trying to get rid of the campaign bribery racket that is so pervasive and still legal in Oregon.
Jun 4, '09
So do we. That's why we elected Obama. The forecast has changed, but the weather's the same!
And another CIA flight takes off, kidnapping, maiming, raping, torturing and killing whomever the unaccountables want to take to accounts.
Back at the ranch, you're right. This has been an issue since 2001, when we were going to get tough on international money laundering. It never happened, because that's how US corps do business anymore.
Jun 15, '09