New Reports Highlight Bad Companies, Variable State Subsidy Enforcement

In case you missed it, two reports came out last week highlighting two of my favorite topics, tax havens/tax avoidance and economic development. The first is "Representation Without Taxation," a report identifying the Dirty Thirty companies that paid more for lobbying than they did in taxes. The second is "Money Back Guarantees for Taxpayers," a study of state enforcement of subsidized companies' job commitments.

"Representation Without Taxation" was published by the U.S. Public Interest Research Group and Citizens for Tax Justice. It combines data on the taxes of the 280 Fortune 500 companies that were profitable in every year from 2008 through 2010 with what they spent on lobbying. Of the Dirty Thirty, they write:

These companies so deftly exploited carve outs and loopholes in the tax code that all but one of them enjoyed a negative tax rate over the three year period of the study, while spending nearly half a billion dollars to lobby Congress on issues including tax policy. Altogether they collected $10.6 billion in tax rebates from the federal government.

Ordinary American taxpayers and small businesses must pick up the tab when major corporations avoid their taxes. Spread out over every individual tax filer in America, the taxes avoided by the Dirty Thirty break down to an average of $481 per taxpayer over the three years.

Remember, this is just for 30 companies! On the list are well-known names like General Electric (a $4.7 billion refund on $10.5 billion in U.S. profits, $84 million in lobbying!), DuPont, Verizon, Boeing, Wells Fargo, and Mattel. At least 22 of the firms had subsidiaries in tax havens.

I disagree with the report's use of the term "tax subsidy" to describe the results of tax avoidance, but I wholeheartedly agree with its major recommendations to fight tax havens: end deferral of foreign profits, treat U.S.-controlled foreign subsidiaries as domestic for tax purposes, and reporting profits country by country rather than in consolidated fashion (Publish What You Pay).

Good Jobs First released "Money Back Guarantees for Taxpayers," a look at states' use of clawbacks against subsidized companies that fail to keep their job promises. The result was a "good news, bad news" pattern: On reporting job performance, the good news is that 90% of 238 programs studied require it, but the bad news is that in 78 cases there is no verification of the job numbers. On clawbacks, the good news is that 178 programs had penalties and another 41 were pay-for-performance (the subsidy is not paid until the jobs are created), but the bad news is that for 84 programs, the penalties can be waived.

I should note the recent trend by some companies to demand "no clawbacks" in their agreements, as for example in the recent case of Electrolux in Memphis.

The worst news is that states disclose very little of their enforcement action: For example, only 38 programs publish the names of companies that don't fulfill their job commitments, and a mere 14 programs publish information on which companies are penalized and how much.

Combining scores for what states require from subsidy recipients (from last month's Good Jobs First Report "Money for Something") with clawback scores, the states with the best programs are Vermont, North Carolina, and Nevada. The three worst are DC, Alaska, and North Dakota.

As you can see, we have plenty of work cut out for us in both of these issue areas. Both reports should find their way to your virtual library