CWA Members, Lawmakers Rally To Close Corporate Tax Loopholes

by Christine Stuart | Apr 29, 2010 5:12pm
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Posted to: State Capitol

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“Loopholes suck! Loopholes suck!” a group of Communications Workers of America and a dozen lawmakers shouted Thursday at a rally on the steps of the state Capitol.

The loopholes to which they are referring are those included in Connecticut’s tax code, which allows multi-state corporations to shift their profits to states with no corporate income tax.

Proponents of a bill to eliminate the loopholes say it will bring equity to the tax code and revenue to the state. Opponents of the bill say the Department of Revenue Services already goes after corporations that try to shift profits to other states.

The Office of Fiscal Analysis recently estimated that the state could see an $88 million increase in revenue in 2011 if it implements a combined unitary reporting tax to require these multi-state corporations to report their profits in Connecticut. The number is based on data from Maryland, which recently required corporations to report data and saw a 20 percent increase in collections.

Rep. Cameron Staples, D-New Haven, said that’s $88 million corporations are currently not paying the state.

“It’s money they owe,” he said.

He said the bill, which is on the Senate calendar, creates one tax return for all the subsidiaries of a large corporation, such as AT&T or Wal-Mart.

And it’s a reform that’s happening in other states.

Connecticut Voices for Children and the Yale Law School Legislative Advocacy Clinic recently conducted a study that found more than half of states with corporate income taxes—23 out of 45—already require combined reporting. In addition, the study found that 86 percent of Connecticut’s largest employers already operate in states that require combined reporting. Click here to read our previous report on those statistics.

Joseph Brennan, vice president of government affairs for the Connecticut Business and Industry Association, said the state has no idea what it will see in revenue if it implements unitary reporting. If the number is accurate, “it’s a large tax increase during a difficult economic period,” he said.

The Department of Revenue Services already can overrule apportionment’s, Brennan said.

“This may be a priority for certain people, but it’s an $88 million tax increase for others.”

Brennan says the legislature started its session this year talking about jobs and economic growth, but bills like this don’t send a positive message to businesses looking to expand or relocate to Connecticut.

Sen. Edith Prague, D-Columbia, said she is eager to pass the bill in the Senate.

“Too many people are making too much money and not paying their fair share,” she said.

The bill has to pass the Senate before it comes to the House, but everyday that passes “is not a good day for a controversial bill,“ Staples said. “The sooner it gets to this chamber by the end of the weekend, the better.”

Prague said the Senate can take it up at anytime.

But even if it does pass both chambers, will Republican Gov. M. Jodi Rell sign it?

Rell spokeswoman Donna Tommelleo said the administration has no specific position on the bill. However, she said it should be made clear that “we don’t need more taxes, we need less spending.”

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