May 13, 2011; Source: Center for Budget and Policy Priorities | Zero is a nice simple number, isn’t it? That’s what some corporations such as General Electric already pay in taxes. A simple very round number. Corporations across the country are pushing H.R. 1439, the Business Activity Simplification Act of 2011, which would help some corporations make progress toward the simplicity of low or no taxes, like the ones G.E. sees (or doesn’t see).
According to the Center for Budget and Policy Priorities, multistate corporations are pursuing a strategy at the state and federal levels simultaneously. On the state level, corporations have gotten 22 states to enact a plan to lower corporate taxes for in-state corporations and raise taxes for out-of-state corporations. But federal legislation would make it much more difficult for states to require many of those out-of-state corporations to pay any income tax to them at all because the federal law would supersede the state laws on out-of-state corporate taxes.
According to CBPP, “The net effect would be to lower the taxes of the in-state corporations and eliminate them entirely for the out-of-state corporations . . . a ‘heads I win, tails you lose’ system of state corporate income taxation – with corporations the winners and state treasuries the losers.”
It is a stunningly creative strategy for some corporations. The complex interactions of the state and federal laws would create “nowhere income” that essentially escapes most or all of state corporate income taxes.
Put in perspective, it shows states increasingly willing to let corporations off the hook for state income taxes, with no particular argument that this has any relationship to job creation or increased state revenues or any other social benefit. At the same time, it shows many states willing to slash critical social safety net programs and to try to suck revenues out of tax exempt nonprofits through fees, charges, and, for municipalities, all but mandatory voluntary payments in lieu of taxes.
It also shows the importance of solid nonprofit advocacy. Otherwise, the much better heeled special interests will advocate to simplify the lives of multistate corporations and leave nonprofits and their constituencies in the cold.—Rick Cohen