How Corporate Tax Loopholes Compromise Our Future

By Donald Simonson, Ph.D. 

The notion of “paying it forward” is a popular one, and while we may not think about our income taxes as a form of paying it forward, that’s exactly what we’re doing. The public works that we all depend upon today—roads and highways, schools and parks, telecommunications and electrical grids, even courts and prisons—were made possible in part by taxes paid by past generations. And the taxes we pay today won’t just go toward keeping these systems and infrastructure in good repair, they will also be needed to plan for our future and address unexpected issues and opportunities. This kind of long-term vision is the foundation upon which the United States was built.

Our public works and infrastructure don’t just improve our quality of life, they also make our modern economy possible. Savvy American corporations understand that they depend on this infrastructure and that they bear responsibility for helping to pay for it. As the new report Burning Our Bridges (Center for Effective Government) shows, much of our nation’s infrastructure needs could be covered simply by collecting income tax on the profits that several corporations have retained overseas.

Over the last several decades, U.S. corporations have been paying a much smaller share of the nation’s taxes. In the 1950s, corporate income taxes made up more than 25 percent of the tax money collected by the federal government. It has now shriveled to just over 10 percent. Here in New Mexico, corporate income tax revenue is expected to decline by 60 percent.

While their tax bills are down, corporate profits are at record highs. Tax breaks, loopholes, and creative accounting practices are at record highs, as well. The Burning Our Bridges report looks at the loophole that allows U.S. corporations to transfer their profits to other countries that have low tax rates (or no taxes at all). The report juxtaposes the rapid rise of the offshoring of American corporate profits with the plunge in federal funding for infrastructure.

Among some of the report’s disturbing findings:

  • Corporate offshoring tax abuse costs the U.S. Treasury an estimated $90 billion annually.
  • Bringing our nation’s aging infrastructure up to 21st century standards will cost $3.6 trillion over the next five years.
  • Our failure to make these investments will cost us $1.8 trillion a year in travel delays, water leaks and power outages.

Individuals and American businesses must bear the $1.8 trillion cost of inaction together if we allow our infrastructure to continue crumbling and failing. No business wants to lose money because of failing transportation or undependable power, but that is what will happen. Businesses understand it takes investment to ensure future profits and that includes investment in infrastructure. Infrastructure projects are appreciated by economists on the left as well as the right. The question remains: how do we pay for infrastructure, particularly when we’re collecting fewer dollars in income taxes?

New Mexico is facing this same conundrum. Despite the fact that New Mexico has granted hundreds of millions of dollars in corporate tax cuts over the last few years, special interests continue to lobby for more. In fact, in the just-concluded legislative session, a bill that would have cut business taxes passed the House, but not the Senate. The special interests want the Governor to call the Legislature back into a special session to pass those tax cuts. But that’s not all. They also want a capital outlay bill to fund public works projects passed as well.

We can’t have it both ways. If business groups want a state with reliable public works and infrastructure, they must be willing to make investments in it. We all have a duty to pay it forward for future generations. Forward thinking, profit-seeking businesses know they must pay their fair share to help keep our state’s and nation’s infrastructure sound.

Don Simonson is treasurer for the Board of Directors of New Mexico Voices for Children and an emeritus professor of finance at UNM.

This is post originally appeared at New Mexico Voices for Children

Where to vote in New Mexico

The early voting period ends on Saturday, November 1. Days and hours depending on specific counties and polling locations.

Election day is Tuesday, November 4. Polls open 7 am to 7 pm.

Bernalillo County:

Doña Ana County:

Santa Fe County:

Other New Mexico Counties

Pearce a roadblock to immigration reform

By Stephanie Maez (Guest Column, Las Cruces Sun News, Sept 7, 2014)

Many of us have been working for comprehensive immigration reform longer than most people have been with their current employer. We do this because we believe in the values that our country stands for, and because we know that immigration reform will in fact strengthen our nation.

We can all agree that the current patchwork of immigration policies and programs do not work. This broken system is one that politicians are unwilling to fix. The lack of will to resolve this issue is making the situation worse by the minute.

What are the facts of the current situation?

Continue reading

Corporate Tax Giveaway Update: Gov. Martinez’s budget wizard apologizes for misleading legislature

Back in mid-March during the closing minutes of the 2013 session, the New Mexico House passed a massive corporate tax cut package — with no floor debate and no questions permitted. And, in what most observers believe was an unprecedented breach of protocol, Department of Finance and Administration Secretary Tom Clifford was allowed to take the microphone on the House floor and speak. His budget wizardry was enlisted in a last-ditch attempt to calm the anxieties of legislators.

Why the heartburn? Well for one thing, hardly any of them had had a chance to read the so-called “compromise” bill that had sprung out of Finance Committee the night before. The House Taxation and Revenue hadn’t seen the bill — although it had previously rejected many of its key components earlier in the session. There were legitimate long-term concerns about fiscal impacts of such a far-reaching measure.

This was a bill that would slash the corporate tax rate and replace some of the lost state revenue by pushing the tax burden onto New Mexico counties and municipalities.

But never fear, they said! Tom Clifford is here.

And he won the day with his stand-up routine. The rules of the legislative process were stretched beyond the breaking point. Yet based on his confident assurances, the bill picked up enough Democrats to pass with time having expired on the clock.

Governor Martinez wasted no time in signing HB641 into law. Then her PR flacks kicked into overdrive, spinning the national news media with a tale of New Mexico’s bold Latina Republican governor whose consummate political skill brought an obstructionist Democratic legislature to its senses and got it to pass “her landmark tax reform.”  (Subtext: Don’t you know presidential timber when you see it!)

Out-of-state political fundraisers featuring the all-conquering Governor quickly ensued.

Well, the story doesn’t end there.

Yesterday, almost two months after that day of infamy in New Mexico legislative history, we got the rest of the story. From the Albuquerque Journal:

Apology given for tax bill information
By Dan Boyd on Wed, May 15, 2013

SANTA FE – The top budget official in Gov. Susana Martinez’s administration apologized to legislators Tuesday for claiming in March that a massive tax package would have a positive fiscal impact to the state during each of the next five years.

Finance and Administration Secretary Tom Clifford told members of an interim legislative committee Tuesday the information he provided on the House floor during the final hours of this year’s 60-day session was based on a different version of the bill.

“I apologize for that,” said Clifford, who testified on the tax package during the frantic final minutes of this year’s session.

In contrast to Clifford’s original claim, an estimate released after lawmakers approved the tax package calculates that the legislation will cost the state more than $70 million in forgone revenue in the 2017 fiscal year. It will provide the state with about $15 million in additional revenue during the next two budget years before the fiscal impact turns negative, according to the estimate, which does not factor in possible future economic development.

At least one Democratic lawmaker said Tuesday that he did not think the tax package would have been approved by the Legislature if Clifford had originally portrayed the budget hit as negative.

“If he would have told membership the truth, I don’t think they would have voted for it,” said Rep. Jim Trujillo, D-Santa Fe, who voted against the bill.

Read the rest of the story here… and weep.

New Mexico, it’s time to modernize our elections (VIDEO)

What’s wrong with this picture? Voters waiting in line for hours to vote in Chaparral and Rio Rancho. Hard-to-update, inaccurate paper-based voter registration systems. It’s little wonder that New Mexico’s voter participation rate is so disappointing. Our elections should be free, fair and accessible to all New Mexicans.

Of course, Sarah has some answers:

The Minimum Wage: Hard Work Deserves Fair Pay (VIDEO)

(January 21, 2013) So says Sarah Kennedy in this video. Word is that the New Mexico Legislature will consider a measure to hike the state’s minimum wage. Not only is that good news for working families, it will give a much-needed boost to our state’s lagging economy.

You tell ’em, Sarah!

You can follow the minimum wage fight at the new MinimumWageNM facebook page.