Tax breaks to be studied — and cut?

Suggestions Box
By LANCE TAPLEY  |  September 26, 2013

tji_taxes_092713_main 

State government has not been in a generous mood in recent years. In the spring Republican Governor Paul LePage refused to take even “free” federal money to cover 70,000 low-income people with Medicaid (MaineCare) health insurance. Come January, thousands will be thrown off the program.

The current two-year state budget reduces aid to cities and towns as well as the “circuit-breaker” property-tax-relief program. Many state agencies suffered budget cuts after a Republican Legislature slashed taxes in 2011.

Meanwhile, state government has continued its long-standing practice of handing out billions of dollars in tax breaks each year. (See “Tax Break Heaven,” by Lance Tapley, February 22, 2008.)

But this year the Democratic-Party-controlled Legislature created a Tax Expenditure Review Task Force charged with finding $40 million by eliminating or shrinking some tax breaks. (“Tax expenditure” is policy-speak for tax break.)

This effort supposedly will not be just another study of tax breaks, of which there have been several over the years. The $40 million must be found if the two-year state budget passed in June is to be in balance.

Progressive organizations that keep an eye on the state’s perennial budget squeeze have suggestions for what the task force might look at.

“Less than 4 percent” of private employers have benefitted from state tax loopholes, says Maine People’s Alliance executive director Jesse Graham. But the ones that do benefit include “many large, out-of-state corporations that should be asked to finally pay their fair share.”

“From 2009 to 2011, Walmart alone received more than $4.1 million in state subsidies,” he says — “money that could be going to education, health care, and building stronger Maine communities.”

Many subsidies are via the Business Equipment Tax Reimbursement program (BETR), which cost the state $47.6 million in fiscal year 2013, which ended in June. BETR reimburses local property taxes to businesses. The top dozen companies cut BETR checks that year were:
Verso Paper | Memphis TN | $4,062,513
Bath Iron Works | Bath | $3,436,124
S.D. Warren | Boston MA | $2,879,843
Katahdin Paper | East Millinocket | $2,416,347
National Semiconductor | Santa Clara, CA | $1,967,855
Nestle Waters North America |  Norwalk CT | $1,848,025
Twin Rivers Paper | Madawaska | $1,503,628
Tambrands | Cincinnati OH |  $1,332,517
Madison Paper Industries |
Madison | $1,143,740
Hannaford | Salisbury NC | $1,092,151
LL Bean | Freeport | $960,238
McCain Foods | Lisle IL | $897,169

Graham also notes a 2011 report by the US Public Interest Research Group Education Fund that estimates Maine loses $58 million a year in tax revenue from corporations and wealthy individuals sheltering money in foreign tax havens.

“Maine families and our small business owners don’t have teams of tax lawyers scheming up ways to stash money in the Cayman Islands,” he says.

The PIRG study proposes requiring increased disclosure by companies of their business operations in other nations so that profits can be taxed “according to the company’s level of activity in each country.” PIRG also recommends companies be required to explain “large disparities” between profits reported to shareholders and to tax bureaus.

Joel Johnson, an economist at the Maine Center for Economic Policy, also suggests the panel look at the BETR program. But he has a suggestion involving even bigger numbers.

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