Tax Fairness / Corporate Tax Disclosure

 

 

Every Wisconsin resident and business depends on high-quality public services, ranging from such things as good roads and good schools, to quality fire protection and clean fishing lakes, to fair courts of law and safe neighborhoods. Where can the revenue be found to ensure high quality public services statewide? Certainly the homeowner has reached a limit as far as property taxes go.

 

One sector of Wisconsin’s economy remains relatively untaxed: the corporate sector. 

A long-term drop in corporate tax payments is a big reason that taxes seem high for wage-earning families and homeowners. But many of the corporate tax loopholes remain hidden under secrecy rules and complicated tax codes. Sustaining Wisconsin’s quality of life will require closing corporate tax loopholes, preventing new ones from being created, and requiring the public disclosure of corporate tax payments.

 

‘No More Tax Secrets’ corporate tax disclosure legislation should be a priority.  New legislation is needed requiring corporations to disclose their state tax payments and any accounting techniques they use to avoid paying Wisconsin taxes. Then we will be able to collect a fair amount of taxes from large corporations to help fund the public education system and public services from which they all benefit.

 

 

Talking Points

 

  • Large corporations are paying a shrinking share of state and local taxes. For

example, the corporate income tax share of state revenue has been cut in half in the last 20 years. The corporate share of property taxes has fallen by one-third. This means wage-earners and homeowners pay an increasing share of state and local taxes.1

 

  • Wisconsin’s corporate sector pays a smaller share of state and local taxes than

businesses do in 40 other states. In fact, Wisconsin’s corporate sector is underpaying taxes by $1.3 billion annually, compared with what they would pay if their share were just at the national average.2

 

·   There are many tax loopholes which large corporations use to avoid paying taxes

on profits in Wisconsin. For example, the ‘Las Vegas loophole’ allowed 80% of Wisconsin banks to avoid income tax by shifting their Wisconsin profits to operations in Nevada, which has no corporate tax.3   Other loopholes have allowed Wal-Mart to avoid millions of dollars in state income tax, by using clever accounting tricks and complicated corporate structures.4

 

·  Of the 4,275 corporations which filed income tax returns in 2003 and had total

revenue of more than $100 million, 62 percent paid no state income tax, according to the Wisconsin Department of Revenue.5

 

  • These tax loopholes are unfair to the small- and mid-sized companies that only do

business in Wisconsin. They aren’t able to take advantage of the loopholes that the giant firms use. Closing the tax loopholes would restore a fair playing field for local firms.

 

Status of Disclosure Legislation:  The ‘No More Tax Secrets’ corporate tax disclosure legislation is being drafted by Senator Dave Hansen (D-Green Bay). 

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1  Wisconsin Legislative Fiscal Bureau.

2  Ernst & Young, Total State and Local Business Taxes; Institute for Wisconsin’s Future, Broken

    Partnership report, April 11, 2007

3  “Tax Shelters Cost States Billions,” by Mike Ivey.  The Capital Times (Madison), July 16, 2003.

4  “Wal-Mart Cuts Taxes by Paying Rent to Itself,” by Jesse Drucker.  Wall Street Journal, Feb. 1, 2007;   

    Institute for Wisconsin’s Future, Broken Partnership report.

5   “WMC Ignores Business Tax Facts,” by Jack Norman.  Capital Newspapers (Madison), Dec. 15, 2006.

 

November 2007                                                                                                                                                                     JR/ls:opeiu#9,afl-cio