This post originally appeared on the Maine Center for Economic Policy blog.
When corporations receive lucrative tax incentives and don’t pay their fair share of taxes, they profit from the hard work of Mainers and exploit the resources of our communities while undermining our prosperity.
At the national level, the data clearly shows massive corporate tax avoidance. For example, in 2020, 55 of the largest companies in the United States paid no taxes. This represents billions of dollars in lost federal revenue and also jeopardizes state resources, as Maine tax filings are based on numerous federal rules that allow businesses to avoid taxes.
Unfortunately, due to lack of transparency, we have very little information about how much tax corporations pay in Maine. We also know little about corporate tax incentives and whether corporations and businesses that avoid taxes also benefit from receiving tax incentives that could instead support our schools, roads and communities. This leaves us with an incomplete picture of economic development efforts in Maine, whether they are working and how they can be improved.
Information obtained by the Economic Policy Institute (EPI) from seven states reveals that more than 60% of companies operating there pay no income tax. Some of these non-taxable corporations were highly profitable, but between 11% and 27%, with over $1 billion in federal taxable income, pay little or nothing in income tax. We don’t know what those Maine numbers are because the data hasn’t been made public — but it should be.
Between 1989 and 2017, the state and local tax rate per dollar of corporate profits fell by one-third to one-half depending on how it’s measured. EPI estimates the resulting shortfall is at least $43 billion and possibly as much as $57 billion – resources that could have supported much-needed public investment in areas such as health care. , housing and recovery treatment. States have lost billions of dollars in revenue as a result of these cuts.
The erosion of corporate income tax revenues is not a reflection of declining profits – corporate profits have increased even as corporate tax revenues have fallen. State policy decisions over the past few decades have reduced corporate taxes and allowed them to exploit loopholes in our tax code to pay little or no tax. As corporations paid less tax, fewer dollars were invested in our communities to provide services and supports and invest in areas like education and infrastructure.
Another recent report from Good Jobs First finds that Maine’s transparency on business tax incentives ranks among the worst in the nation. Based on a review of five Maine business tax incentives expected to cost Maine taxpayers more than $96 million in FY23, minimal transparency was found in a number of categories. , notably :
- place, year and nature of the projects
- whether applications and project proposals are publicly available for review
- type of company and parent company of the winners
- grant awarded and grant disbursed/claimed
- number of jobs planned versus actual jobs created
- projected wages versus actual wages
- planned and actual capital investment reports
- whether the program data is clear and easy to obtain
Lack of transparency undermines accountability. If information about corporate tax incentives is kept secret, how can we assess whether the programs are achieving their goal of creating jobs, promoting innovation, or raising wages? Or compare the public costs of providing tax incentives with the benefits to our communities and our workforce? We also can’t see if companies are holding up their end of the bargain by making the promised investments.
Addressing these issues begins with greater transparency of how much tax companies pay and how much they receive in tax incentives. It’s time to make sure they pay their fair share in Maine. We can start by making information about corporate taxes and corporate tax incentives public – we deserve to see what corporations pay in taxes.
Photo: Mike Mozart, Creative Commons via Flickr