Issue link: http://educator.cta.org/i/15938
Prop. Ensuring that large corporations pay their fair share written by Sherry Posnick-Goodwin The Bureau of Economic Analysis recently reported that U.S. corpora- tions are sitting on $1.6 tri llion in cash reserves, a record amount. As a percentage of companies’ total market capitalization, it’s more than double the ratio seen before the economic crisis hit. The money, notes the re- port, is being “hoarded” and is not being used to cre- ate new jobs. No n et h e les s, help keep the state from making deeper cuts to public education, health care and public safety. If Prop. 24 passes, it wi ll ensure that a few big corporations pay their fair share of state taxes by repealing three special corporate tax loopholes that were slipped into budget deals last September and again in February 24 Cali fornia legisla- tors granted corpo- rations a huge tax break last year. At the same time, legislators raised taxes for middle-class Californians by 18 percent. But taxpayers aren’t the only ones who lost out on the deal. Thousands of teaching positions were eliminat- ed, and for students heading back to school, there are overcrowded class- rooms, fewer instructional days due to furloughs, and shortages of basic supplies like paper and pencils. The corporate tax breaks, called a “dead of night deal” by the Sacramento Bee, were made without hearings and pub- lic testimony. They don’t even require the creation or protection of one sin- gle job in California. The good news, however, is that voters can repeal the tax breaks be- fore they are scheduled to take effect next year by passing Proposition 24 — the Tax Fairness Act — in the No- vember election. Prop. 24, sponsored by CTA, would end $1.3 billion in special tax breaks for big corporations. Those funds will behind closed doors. These loop- holes, slated to go into effect in 2011, allow corporations to get refunds for taxes in past years by writing off new losses; get tax credits for things like research and development, and cash those credits in to reduce taxes on prof its that have nothing to do with these efforts; and use a lower sales- based income formula to reduce tax- es, for corporations that do business in other states. The Bee of fers a scenario of how some companies might benefit: “The breaks would be sweet. Say a compa- ny has two good years. It pays taxes, and the state spends the money. Then, say the company loses money. It could use that loss to get a refund on the taxes it paid in the two previous years. The break, amounting to $500 million annual ly, would force the state to essentially grant retroactive tax refunds.” The big corporations that are pay- ing to defeat Prop. 24 and keep these loopholes paid their CEOs more than $8.5 billion in the last few years, and made more than $65 billion in profits last year, while at the same time lay- ing off more than 100,000 workers. Meanwhile, during last year’s budget disaster, the Legislature made $30 bil- lion in cuts that resulted in 16,000 teacher layoffs, hiked college tuition for students, and put 6,500 prisoners back on the street. CTA President David A. Sanchez These tax breaks unfairly benefit less than 2 percent of California’s businesses, and they are the state’s wealthiest multistate and multinational corporations. notes that corporate taxes accounted for 15.4 percent of the general revenue collected by California in 1976. “By 2014, after the breaks take hold, cor- porations would only account for 9.4 percent of tax collections,” says Sanchez. “To say this would hurt businesses is misleading, because 98 percent of Califor- nia’s businesses — especial ly smal l businesses — would get virtually no benefit from the tax breaks. These tax breaks unfairly benefit less than 2 per- If Prop. 24 passes, it would repeal loopholes that allow corporations to: > Get refunds for taxes in past years by writing off new losses. > Get tax credits for things like research and development, and cash those credits in to reduce taxes on profits that have nothing to do with these efforts. > Use a lower sales-based income formula to reduce taxes, for corporations that do business in other states. SEPTEMBER 2010 | www.cta.org 23 yes