The official corporate federal income tax rate in America is 35%. But corporations like Mitt Romney (corporations are people, so people are corporations, right?) often pay an effective tax rate less than 15%.
Corporations get a similar break on state taxes. A new report—aptly titled "Corporate Tax Dodging in the Fifty States"— from the Institute on Taxation and Economic Policy finds that while the average corporate state tax rate is 6%, Mitt Romney's base manages to cut its effective tax rate in half, depriving states of $42.7 billion. (Nationally, the projected state budget shortfalls for FY 2013 total $44 billion.)
One big reason states lose out on corporate taxes is as obvious as Referred Law 14 on South Dakota's ballot: corporate welfare that doesn't produce the economic development on which it is predicated:
The first reason is that state lawmakers persist in enacting targeted tax breaks for specific industries or companies without any evidence that these are effective economic development strategies....
It's important for state lawmakers to maintain a healthy skepticism about whether state corporate tax breaks can ever be a job creator. I say that because the tax environment is different at the state level than it is at the federal level. States have to balance their budgets. Any tax cut has to be paid for. In the current fiscal environment, when a state gives a corporation a $100 million tax break, it has to make this up somehow. It could be in the form of spending cuts -- less road construction or salary cuts -- or by hiking other taxes. This isn't an especially good approach to growing state economies. Moreover, the real losers in this zero sum game are often the other companies that are competing with the companies that get the tax breaks. It's profoundly anti-free market. There's nothing more antithetical to the free market than having the tax system pick winners and losers. State lawmakers lose sight of the fact that targeted tax breaks amount to social engineering [Matthew Gardner, executive director, ITEP, quoted in Penelope Lemov, "Losing out on Corporate Taxes," Governing, 2012.01.18].
South Dakota is one of six states that doesn't have a corporate income tax, but we find plenty of other wealth to transfer from citizens to corporate pockets to incentivize business activity that would have happened anyway.
I hate being tricked like that. So should you. Let's get corporations to pay their fair share for the general welfare.
Please explain to your readers how a 35% marginal tax bracket equals a 35% effective tax rate. I'd love to hear this.
It's minus 6 degrees this morning. They can give all the tax breaks and incentives they want, but people aren't gonna move here. My brother in law used to joke about the Citibank employees from NY that lasted one year and went home. We don't seem to be good at understanding for whom SD is the right fit. Not cold skinny people.
"South Dakota is one of six states that doesn’t have a corporate income tax"
Cory, that is a strawman to the criticism placed on "targeted" tax cuts. And the same economic unfairness occurs with government subsidies, including welfare, corporate or individual. The solution is to reduce the scope and thereby the size of government, therby lowering the tax rates so that we the citizen as individuals make the economic decisions, not politicians.
Mexico would be a lovely place to be if Sibson was in charge of making economic decisions for the State.
..."so that we the citizen as individuals make the economic decisions, not politicians."
Pure vintage Sibby.
On the one hand, he argues for a Republic, and on the other Direct Democracy as per above.
Then sometimes he puts on his tin-foil hat, chugs a glob of Jesus juice and goes all Christian anarchist on us.
Then he wonders why no one ever listens to him.
Sibby, it's because your world view has more flip-flops in it than a Romney Surf Shop.
Taunia, I will add you when I pray for Bill.
No thanks.
Or, rather, no, thank you.
In a Direct Democracy the majority (99%) can make the minority (1%) give all their property to the government so that the economic decision making is centralized. A Republic would say that the minority (1%), have a God-given right to their property and not allow the redistribution.
So Bill, what part of that confused you.
"Or, rather, no, thank you."
Too late.
Ok. Just make sure you draw a pentagram on the floor and light some candles for me during your incantations.
You still shouldn't be in charge of economic decisions for the State.
WBUR has an awesome discussion of the wealth tax.
Matthew 6:5 - 7
5. And when thou prayest, thou shalt not be as the hypocrites [are]: for they love to pray standing in the synagogues and in the corners of the streets, that they may be seen of men. Verily I say unto you, They have their reward.
6 But thou, when thou prayest, enter into thy closet, and when thou hast shut thy door, pray to thy Father which is in secret; and thy Father which seeth in secret shall reward thee openly.
Sibby, your public announcement of prayer for us (blogs are visible worldwide) is blasphemy as far as your master is concerned.
Better shape up brother, get back in that closet, pray up a storm, and don't come out till you can play nice in the sandbox.
Oh now, Bill. I think Sibson, in his own personally deluded way, really does believe I need his prayers. If it makes him feel better and enriches his life, let him make me the main topic of his prayer.
I'll take one for the team. I'm all for making someone else's life a little more special.
Apologies to Cory for going off topic. I'm going to go sacrifice a head of broccoli now for my transgressions.
But Sibson still shouldn't be in charge of any economic decisions for the State.
No Taunia, Bill is right. I sinned. Time to repent.
And since Bill refused to answer if Jesus Christ is more than a great spiritual leader, I will. It is only Jesus Christ who can take away our sins. He is far more than just a great spiritual leader.
John, how do skinny guys like you and I survive here without tax breaks? :-)
And Sibby, it's your vaunted Republic that gives corporations these handouts. The "Republic not Democracy" meme seems irrelevant to this discussion.
"The “Republic not Democracy†meme seems irrelevant to this discussion."
Sorry Cory, Bill brought it up and I responded. I think you and I are on the same page as to this being a problem, but differ on the solution.
Not at all Cory and Sibby, Steve comments, thus:
"The solution is to reduce the scope and thereby the size of government, therby lowering the tax rates so that we the citizen as individuals make the economic decisions, not politicians."
Ask just about anybody and they will tell you, (in so many words) that the whole function of government is to decide "who gets the money." In the quote above, Sibby is arguing that it should be the "citizens as individuals" as opposed to their elected representatives in government. In other words, shrink the government down to the size of the individual citizen. If that's not an argument for direct democracy (and perhaps even anarchy), I'll eat my hat. Sibby is talking out of every orifice he has all at once, IMHO.
"the whole function of government is to decide “who gets the money.â€"
Bill that is true in a communist country, not a Republic. What you are saying is that if the tax is not 100%, we have anarchy. In a direct democracy you may not decide what happens to your money, the majority will.
[Again Cory, sorry for going off subject but I will not let Fleming's distortions and deceptions stand.]
Sibby, you really need a civics lesson, brother. Here are the first six specifically enumerated powers of Congress, as per the US Constitution:
Section 8 - Powers of Congress
The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;
To borrow money on the credit of the United States;
To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;
To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States;
To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;
To provide for the Punishment of counterfeiting the Securities and current Coin of the United States;
__________________________
In other words "who gets the money." It has absolutely nothing to do with communism. Nothing. End of discussion.
Is GDD's plan to only reward merit to 20% of our teachers consistent with economic development policy in SD---that being we entice by giving out handouts? Any thoughts?
Charlie, I'm not sure what metrics Gov. Daugaard uses to decide who gets economic development bonuses. I don't think he works as hard to recruit new teachers as he does new businesses (remember his December trip to San Diego to lure businesses? I don't think he stopped by any school to recruit new teachers).
But I do think we have some state-sponsored contests for entrepreneurs, don't we?
Fleming, after the Constitution was created, there were 3 major changes:
1) Federal Reserve, now the government no longer controls the money, international monopoly capitalists do.
2) Direct election of Senators, now that is a true move to Direct Democracy.
3) Income Tax where the majority makes the minority pay more. Again, another example of direct democracy.
So the Constitutional Republic has been destroyed and replaced by not a 100% direct democracy, but a socialist hybrid call fascism.
Bill, are you part of the deception that has been used to make people think this is the America of our founding, or are you an indoctrinated fool yourself.
[Again Cory, sorry for being off topic, but maybe this will help explain how the owners of the Corporate Industrial establishment have garnered control of our assets. And they did that through making the government bigger as they expanded the scope beyound those enumerated by the original Constitution. The solution is not continuing to use the government to control those who control the government. That is illogical.]
Richard Florida writes about 40 global mega regions as the powerhouse to the world economy with 20% of the population putting out 2/3rd of the output. Half of the population now live in urban areas. He says economic development comes from these clusters which spring innovation and leverage talents from their being in close proximity to other creative people. Someone in SD government must be very fluent on these trends and wouldn't they be educating/coaching our local economic development efforts? It obviously takes a strategy way beyond tax breaks to fit in with how the world is evolving. Couldn't we develop relationships and get connected to these regions via technology? It was Bill Janklow that made a push for technology change and probably we need to be part of the technology pipeline in some fashion with the state continuing to be part of that effort.
John, unless you suspect that the New World Order represents the Beast of Revelation. Bringing up Janklow also ties to the post on the New Age Nietzsche. Daugaard's education policy that implements the international based Common Core Standards also supports moving South Dakota into the Beast.
Steve, we learn nothing useful from your comment.
"Steve, we learn nothing useful from your comment."
That is because you are an atheist who does not believe there is a God or Satan. I would guess that most of your readers do. For those that do, my point is most critical as to the direction we would want South Dakota to go. Promoting the idea that we should become integrated into the Global Economy (as John seems to be advocating) has more ramifications than simply helping the wealthy corporate special interests to continue centralizing the wealth. And I would think that tying that to education so that the focus is workforce development would be troubling to those involved in the public education system. Once you put more and more parts of the puzzle together, it becomes clear that my point should be the driving element of the debate on public policy here in South Dakota. As I have said before, I would like South Dakota to become an Oasis for those who do not want to follow the globalist crowd. I think that policy discussion would apply to whether we should continue with the industrial agriculture movement, or move back toward small family farms that may have less harmful impacts on the environment. I think the issue of this post is an area you and I agree on, but we become disconnected as to how to avoid dealing with corporate monopoly capitalists. If we are to become more connected, I need to be free to bring forward all elements of my analysis.
No, Steve, I'm pretty sure most of my Christian readers find your prattle about the New World Order and globalists as useless as I do. We're talking about corporate tax breaks and the fiscal stability of state budgets, and you're talking about... well... whatever.
Steve is talking about this, I think, Cory. He just can't figure out how to get with the program:
http://en.wikipedia.org/wiki/The_Cultural_Creatives
Steve would like to convince us that it is an organized conspracy instead of the natural, cultural phenomenon that it is.
http://www.youtube.com/watch?v=gctdXaglWhY
"State lawmakers lose sight of the fact that targeted tax breaks amount to social engineering"
OK Cory, let me try this again. The above quote is from your post. Then you go on to say:
"South Dakota is one of six states that doesn’t have a corporate income tax, but we find plenty of other wealth to transfer from citizens to corporate pockets to incentivize business activity that would have happened anyway."
Cory, we also don't have an income tax on individuals. So there is no targeted tax break to corporations in that regard. The problem is "targeted tax breaks". I have already provided my solution to that real cuase to problem.
https://madvilletimes.com/2012/01/states-sacrifice-43-billion-each-year-to-futile-corporate-tax-breaks/#comment-42601
Unfortunately, instead of reducing the government and thereby preventing the centralization of the wealth, you seem all to happy to allow the centralization to continue and expect the government to then step in and take back what he helped to create with a targeted tax. It is not going to happen. The wealthy are controlling the political process.
And then you go on to say:
"I hate being tricked like that."
Then stop thinking that government is the solution. Government is causing the problem, so why would making it bigger make any sense at all? It is the one conducting the "social engineering", and you and Fleming are useful tools for them.
Government is a required part of the solution: it is the only means we citizens have to check the power of corporations.
Yes Cory, government is a required part of the solution, which is to make it smaller. Don't confuse that with the idea of eliminating it.