The ITEP & CTJ Newsletter
Winter 2013-2014
The Fight for Progressive Tax Reform Continues
Given how anti-government, anti-tax members of
same practices were being used by American Express,
out 2013 (and shut it down completely in October),
tune 500 corporations.
Congress gummed up the legislative process through-
you might be surprised at how much progress Citizens
for Tax Justice made this year educating lawmakers,
the media, and the public about the need for real tax
reform.
The chairmen of the tax committees in Congress,
House Ways and Means chairman Dave Camp and
Senate Finance chairman Max Baucus, pushed their
version of tax reform but, as of this writing, have failed
to get enough agreement to produce a piece of legislation. This is just as well, because what they are pursuing
does not meet any sensible definition of “reform.”
Rep. Camp calls for a tax overhaul that does not raise
any new revenue, while Senator Baucus has been non-
committal and vague on this point. Camp also wants
to exempt offshore profits from taxes, creating more
opportunities for corporations to take advantage of offshore tax havens. Baucus’s proposals to address tax ha-
vens have been a little better, but he nonetheless insists
that he wants to make a deal with Camp.
Throughout the year, CTJ provided a relentless drumbeat of data revealing how corporations were avoiding
taxes and how tax reform could address this.
In May, when a Senate hearing exposed Apple’s prac-
tice of shifting profits to shell companies in Ireland
— a practice defended by anti-tax Senators like Rand
Paul — CTJ published a report demonstrating that the
Dell, Eli Lilly, Microsoft, Nike, Oracle and other ForIn July, when Camp and Baucus began their public
“road show” to promote tax reform, a CTJ op-ed in
USA Today objected that they “have not addressed a
crucial problem — our desperate need for increased
revenue to fund public investments.”
In September, when Camp and Baucus visited a FedEx
facility to promote the type of tax reform that would
help that company, the media turned its attention to
CTJ’s report revealing how FedEx had paid an effec-
tive tax rate of just 4.2 percent over the past five years.
Continued on Page 2
Defense & Offense in the States
State tax fairness took a beating in 2013, as the result of an organized effort by national anti-tax lobbying groups to eviscerate state revenues. In state houses
around the nation, from Arizona to Wisconsin, anti-
tax lawmakers proposed misguided schemes, often
inspired by supply-side theology, designed to sharply
reduce the role of progressive income and corporate
taxes. The “fiscally responsible” versions of these plans
usually proposed to replace at least some of the revenue loss with increased sales taxes. The less responsible ones simply sought to starve governments of the
revenues they need to provide basic public services.
Citizens for Tax Justice • Institute on Taxation & Economic Policy
www.ctj.org • www.itep.org • 202.299.1066
Continued on Page 3
When major corporations found themselves in the
public spotlight in 2013 — as Facebook and Twitter
did when they went public — CTJ issued reports explaining how they used deductions for stock options
and other breaks to wipe out their tax liability.
Meanwhile, CTJ produced reports describing how a
genuine tax reform would address these problems, and
lobbied members of Congress and the Obama administration to ensure that they were aware of our conclu-
sions. One of these reports made the case for setting
three important goals for tax reform: raising revenue,
increasing fairness, and preventing corporations from
shifting profits offshore. The report explains that the
amount of revenue projected to be collected under our
current tax laws in a decade (equal to 18.5 percent of
the U.S. economy) is lower than the level of federal
government spending reached in all but three of the
past thirty years. In other words, it’s clearly impossible
to keep running our government on so little money, as
Camp proposes to do.
Our proposed tax plan would do away with the lower tax rate for capital gain and dividend income (the
break allowing billionaires to pay a smaller share of
their income in taxes than many working people). Our
proposed tax plan would also do away with the de-
preciation breaks that allow companies like General
Electric to pay nothing in taxes, and would end the
rule allowing corporations like Apple to “defer” (indefinitely delay) paying U.S. taxes on profits that they
2
claim to earn “offshore,” and which has given rise to
abuses involving offshore tax havens.
These changes and several others included in CTJ’s
plan would result in a tax system that raises $2 trillion
more than our current system over the next decade. It
would also raise taxes for the richest one percent of
Americans while allowing the poorest three-fifths of
Americans to essentially break even.
Even as Congress seems ready to bring the year to a
close without addressing most of the problems with
our tax system, we have laid substantial groundwork
by providing data on every aspect of the tax code that
needs to be reformed and ensuring that these data are
seen by Congressional staff, administration officials,
reporters and editorial boards. Each news story about
corporations avoiding taxes using an arcane tax loop-
hole uncovered by CTJ brings more letters and calls
to the offices of members of Congress who know that
they cannot run much longer from their responsibility
to enact real tax reform.
- Steve Wamhoff
Playing Defense & Offense in the States (Continued from Page 1)
The good news is that when the dust cleared this fall,
the outcome wasn’t nearly as bad, nationwide, as many
feared twelve months ago. For every state like Kansas,
in which irresponsible tax cuts were pushed through
by a government under single-party control, there was
a state like Louisiana, where a spectacularly unfair and
budget-busting tax plan was rejected by a skeptical
electorate after a healthy debate. And this had a lot to
do with the tireless work done by ITEP’s state policy
staff throughout the year. Whenever a regressive tax
shift was proposed, we moved immediately, working
with state-based groups to analyze the impact on tax
fairness and on tax revenues. The data generated by
our microsimulation tax model gave state lawmakers,
advocates and members of the media the tools they
needed to accurately understand the threats these “tax
deform” plans represented.
It’s sobering to think that in the absence of our work,
there simply would have been no credible information
available in many of these states to help policymakers understand the impact of these often-complex tax
plans. Incredibly, most state legislatures don’t have any
mechanism for informing lawmakers about the fairness and revenue impact of the complicated tax plans
lawmakers must routinely evaluate. ITEP’s work fills
this void. In 2013, our hard-working state crew analyzed tax proposals in an astonishing 44 states and the
District of Columbia. Of course, even as we continue
to work with state groups to disseminate our work in
the short run, we are encouraging state governments
to develop their own fiscal analysis capacity so that
in the future, all stakeholders will have a trusted local
source of information on tax fairness issues.
When our state team wasn’t busy playing defense in
2013, we engaged in an equally vital, proactive role:
working with networks of progressive policymakers
around the nation to nurture and develop forwardthinking and fair tax strategies that will actually
strengthen, rather than weaken, our capacity to meet
fiscal policy challenges going forward. Whether this
meant providing behind-the-scenes technical support
to coalitions of non-profit advocates or supporting the
efforts of legislative tax reform commissions, this proactive work has been, and will continue to be, a top
priority for us. These long-term efforts may bear fruit
in a number of states in which progressive lawmakers
have a voice in governance.
Sadly, the opening salvos of the anti-government lobby’s 2014 agenda have already been fired. Progressives
in dozens of states are bracing themselves against a
continued assault on the fair, sustainable tax system
most of us want to preserve. As dozens of legislatures
come back into session in January and February of
next year, we’ll be ready to burn the midnight oil to
ensure that lawmakers have access to the information
they need to accurately evaluate the best—and the
worst—tax plans.
The fact that 2014 is an election year in most states
means that silly tax reform ideas will be coming out
of the woodwork. As we have in the past, we’ll work
hard to make sure that when candidates propose tax
plans with numbers that just don’t add up, the media
and the voting public will know all about it.
- Matt Gardner
Stay in Touch with CTJ & ITEP
Sign up to receive CTJ’s Tax Justice Digest, our weekly
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Or, like us on Facebook or Follow us on Twitter:
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@taxjustice
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@taxreform_ITEP
3
When Policy Gets Personal: The Tax Reform Battle in My Own Back Yard
Of all the states where fair taxes took a hit this year, no loss is more personal for me than the
tax cuts enacted in my home state of North Carolina.
My head hurts thinking back on the many versions of so-called “tax reform” that emerged
this legislative session, including a serious threat to eliminate our personal income tax. While
it took months of deliberation for the Governor and legislature to reach their disastrous deal,
every proposal had one thing in common: they gave away huge tax breaks to the wealthy and
profitable corporations while hiking taxes on most everyone else. Indeed, the final plan is a
massive tax shift that will leave North Carolina short at least $700 million a year to spend on public investments
that benefit us all.
I take every state tax policy project I work on very seriously. But my passion and efforts were intensified in North
Carolina because it’s where I grew up, where I got my start working on fiscal policy, and where I am now raising a
family. I was not going to stand idly by as lawmakers attacked many of the progressive tax policies that I had actually helped to implement! And knowing these lawmakers were willing to jeopardize the education of our children
for the sake of giving tax breaks to their cronies made me give it my all.
For months I was churning out numbers that helped expose the real impact of every regressive plan on the table.
There were so many nights I fired up my laptop after putting my toddler to bed, and weekends I spent at the office
so our state policy friends, lawmakers and reporters could learn who’d win and who’d lose under each successive
proposal.
In the end, North Carolina enacted one of the most regressive tax changes in recent history, and I shed some serious tears the day they voted. But, with some distance now, I know it was all worth it because without ITEP and
our numbers, the outcome would have been much worse.
We got out in front of the anti-tax lawmakers who wanted to dismantle the state’s tax system. We explained their
plan was not really ”tax reform” at all and we exposed their so-called economic development plans as schemes to
cut taxes for the rich and corporations and make low- and middle-income families pick up the tab.
Conservative North Carolina lawmakers overstepped on tax policy this year, just as they did in other areas, and
my fellow Tarheels took notice. You probably heard about the crowd of students, parents, caregivers, activists, faith
leaders and others who regularly protested outside the General Assembly in what became known as Moral Mondays. Calls to stop tax giveaways to the rich at the expense of everyone else were a major part of their message, and
virtually every major newspaper in the state wrote a scathing editorial against the final tax package.
We hear that the corporate-funded, anti-tax movement plans to expand its disastrous rampage to other states
next year, but my ITEP colleagues and I stand ready to deploy our one-of-a-kind tax model in defense of economic justice.
Thanks to all of you who stand with us!
MegW iehe
ITEP State Policy Director
4
My Take: Tax Reform Progresses Despite Washington’s Dysfunction
While others spent the first day of 2013 eating their last holiday meals or recovering from
their hangovers, I began the year analyzing tax legislation. I was in the CTJ office on New
Year’s Day because Congress, reaching what I (erroneously) believed to be the peak of its
dysfunction, had not managed to address the so-called “fiscal cliff ” of expiring tax cuts until
that very day.
The deal finally struck between Congress and the President made permanent far more of the
Bush tax cuts than we believed could possibly be warranted. As we generated the figures to
demonstrate why, reporters were happy to quote us and cite our estimates, partly because no other tax experts or
political observers were answering their phone on the holiday.
In the months that followed, some lawmakers and some pundits claimed that the fiscal cliff deal resulted in a tax
code that was more progressive than ever, and that now the wealthy really were paying most of America’s taxes. We
promptly published two reports, cited by several media outlets, showing that this is nonsense. We demonstrated
that when you account for all the federal, state and local taxes that Americans pay, our tax system is just barely
progressive, and that the fiscal cliff deal had very little effect on this.
Of course, some members of Congress continued to argue for a “tax reform” that would make the tax system less
progressive. House Budget Chairman Paul Ryan pushed another budget resolution through the House that called
for significant reductions in tax rates and offsetting the costs by repealing or reducing existing tax breaks, which
were unspecified. We published a report demonstrating that the plan could not be implemented without giving
millionaires an annual average tax break of at least $200,000.
As we received more and more grim news about how sequestration resulted in children kicked out of Head Start,
medical research coming to a halt and other services being slashed, we became more determined to convince Congress to enact a real tax reform that raises revenue from wealthy individuals and the profitable corporations that
avoid taxes under the current rules.
To accomplish this, CTJ spent much of the year producing the reports on corporate tax dodgers and viable tax
reforms that are discussed in this newsletter’s lead article.
We also spent time responding to some of the terrible tax proposals that were debated, including a House Democrat’s proposed tax amnesty for offshore corporate profits.
No matter how the year ends, we have now laid extensive groundwork, including data on every aspect of the tax
code that needs to be reformed as well as relationships with those in Congress and the Obama administration
who will make the decisions. This means that when tax reform happens — and it’s bound to happen, giving the
outrages in our tax code that we keep uncovering — we can make sure that Congress pursues changes that really
can be called reform.
That’s one reason why I can end 2013 on a high note, and hope that this New Year is happier than the last, for
all of us!
Steve Wamhoff
CTJ Legislative Director
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CTJ & ITEP in the News: Year in Review
The truth is, sometimes headlines make us crazy here
tionals on public-relations efforts to get their tax re-
tors in the digital era will write headlines to maximize
have. Over at Nonprofit Quarterly, they ran a great
at Citizens for Tax Justice. Seems like too many edi-
clicks and “eyeballs” – even if they’re not particularly
true. But we have to confess, looking over the head-
lines from stories featuring our work in recent months,
there are some pretty great – and truthful! – ones. For
example, Mother Jones magazine ran a story headlined,
“The Loophole That Allows Facebook to Avoid Paying Taxes on Billions of Earnings.” This story was inspired by
our November report explaining that twelve high tech
companies, including Twitter and Facebook, are paying
executives with stock options in order to avoid billions
in corporate taxes. We timed that report to coincide
with Twitter’s much anticipated Initial Public Offering (IPO). Then, in a less sensational headline the next
day, “Senators urge end to U.S. corporate stock-option tax
break,” Reuters explained that Senators John McCain
and Carl Levin also used Twitter’s big IPO to call at-
tention to this egregious, unjustified loophole in the
tax code.
In big-picture tax news, as we go to print, we are waiting on Senator Max Baucus to reveal his proposal for
comprehensive tax reform. In October, however, CTJ
unveiled its own plan, featuring a more progressive tax
code that provides more sustainable revenues than anything currently under consideration in Congress. We
saw a headline in the Wall Street Journal that was a bit
hyperbolic, but it’s a headline we kind of liked: “Think
Tank’s Tax Plan - Heartburn for the Wealthy?” A major
Beltway paper, The Hill, put it in political context with
its “Liberal group rolls out tax plan,” explaining that here
at CTJ, we staked out a decidedly progressive position
on taxes and revenues that flew in the face of Republi-
can demands, and issued a challenge to Democrats as
well.
On the corporate tax issue, we’ve been busy highlighting the growing billions being spent by U.S. multina6
form wish – an even lower tax bill than they already
story about one of our reports called “GE and Other
Corporations Line Up Behind ‘Fix the Debt.’” And Talk
Radio News Service, where talk radio producers go for
story ideas, carried a little feature called “Corporate Tax
Lobby Proliferates,” also based on our reporting.
As much attention as corporate tax dodging gets, when
we’re talking about tax reform and tax fairness, provi-
sions on the individual side of the code matter a lot.
Earlier this year, the Congressional Budget Office
(CBO) produced a study concluding that more than
half of all federal tax breaks for individuals accrue to
households of the richest 20 percent. It’s the same re-
sult we get when we run our analyses of tax breaks. CBS
News wrote a story headlined, “Wealthiest Americans get
most Tax Gravy,” for which they interviewed CTJ’s Bob
McIntyre, who focused on “capital gains – that’s the
big one [tax break] that’s skewed to the top.” We were
also happy to see a column in US News & World Report
called “Penny Pritzker’s Tax Problem.” That column cited our blog post showing how President Obama’s then
nominee (now confirmed) for Commerce Secretary,
Ms. Pritzker, was, like Mitt Romney, a poster child for
all the ways loopholes are available for the very richest Americans but not so much for the rest of us. The
columnist noted that “nominating her does raise the
question of how seriously Obama takes the sort of tax
reforms he has called for.” We agree. And of course,
every April we put out a concise report on who’s really
getting breaks on their taxes. This year, the Washington
Post summed it up with this headline: “U.S. tax code
isn’t as progressive as you think.”
One major reason the overall U.S. tax system is not
as progressive – or as fair – as a lot of people think
is because every single state tax system is indisputably
regressive. Earlier this year, ITEP issued its big “Who
Pays?” report on that very subject, and it generated
powerful headlines all year: “When it Comes to Taxes in
Pennsylvania, It’s Good to be Rich;” “And the rich pay less;”
“Report Says Kentucky Tax System Unbalanced On Backs
of the Poor;” “Indiana Taxes Disadvantage Low-Income
Group;” etc.
help with their profile, “Arthur Laffer is back as GOP tax
man,” ITEP’s Meg Wiehe was happy to explain that
Laffer serves as an “academic front-man” for the supply
side agenda. Reporters have told us Arthur Laffer is
feeling the heat from our Debunking Laffer project,
and we intend to keep that pressure up.
Every September, when the Census Bureau comes out
with its data on poverty rates in the states, we take the
opportunity to highlight our work. This year’s Census
showed poverty rates are generally holding steady or
rising, yet we found states are not doing enough with
their tax codes to ease the burden on their working
poor. What our report showed is that the state whose
tax system is hardest on poor families is Washington
State – and the Washington Post noted the potential
irony with its headline, “The State that Taxes the Poor the
Most is... a Blue One.” We later learned that the Post’s
and other news outlets’ coverage of this fact was so intense that Governor Jay Inslee is asking policy experts
to help him find ways to make Washington’s tax system
less unfair. (Which is a great example of why news
coverage matters!)
ITEP has also become a major resource for reliable
research on federal and state gas taxes, helping journalists year-round as they cover debates over this key
revenue source. Here are a few stories featuring ITEP’s
Carl Davis and his gas tax expertise: US News & World
Report: “Gas Taxation Without Representation;” CNN
Money: “Just in Time for the Holiday, 8 States Raise Gas
Taxes;” Associated Press: “North Carolina, Other States
Look To Tax Hybrids To Recoup Road Funding;” Reuters:
“Road Funds on Empty; More States Weigh Gasoline Tax
Hikes.”
But even as we advance our argument that high taxes
on the poor are bad policy, other groups are constantly
churning out “research” allegedly showing that high
taxes in general are bad for state economies. We hardly
know where to start in terms of how flawed some of
these reports are, so we were thrilled when the Columbia Journalism Review (where journalists go for news)
took a crack at one with an assist from ITEP. In a story
called “Invasion of the Job Snatcher,” CJR used Texas
Governor Rick Perry’s job-stealing junket in Missouri
to expose some of the controversy around an annual
“Business Tax Climate Index” that anti-tax politicians
love to cite. The article nudges journalists to do some
digging into how tax rates really affect business owners’
decisions. Now, as ITEP followers know, Arthur Laffer is one of the most aggressive purveyors of “research”
supporting tax cuts. So when Politico asked for our
We also continue to take the fun out of sales tax holidays by helping more journalists understand they
might make good politics but they are lousy tax policy
and need to be covered more critically. In Mississippi’s
Jackson Clarion Ledger we were featured in “Drastically Differing Views on this Weekend’s Sales Tax Holiday.” You may also have heard NPR’s August feature,
“As Back-To-School Shopping Begins, Consumers May
Turn Frugal,” that included our key point: that these
holidays don’t really help the struggling families they’re
supposed to.
Finally, if you follow our work you know we issued a
report this summer showing how much each state currently collects in taxes from undocumented immigrants
– and how much more each could expect under immigration reform. Our numbers continue to define much
of the coverage of that issue – coverage that Congress
members are reading in their home town newspapers.
The Spokesman-Review, Portland Press Herald, Montgomery Advertiser, Newsday, and Santa Fe New Mexican all cited our report, Undocumented Immigrants’ State
and Local Tax Contributions.
-Anne Singer
7
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Help Us Continue the Fight for Tax Fairness!
After 30 years of fighting for tax fairness, you might think we’d be able to sit back, take a deep breath and relax.
Inside this Issue of Just Taxes
But if you’ve been paying attention to what Congress and the state legislatures are up to, you know this is no time for tax
fairness advocates to relax. Lawmakers at the federal, state and local levels are all trying to figure out how to pay for health
care, transportation, education and other vital services
without pushing victims of our economic downturn even
further into poverty.
• The Fight for Progressive Tax Reform Continues — Cover story
At our 30th anniversary celebration, it was nice to hear
The New Republic’s Jonathan Chait describe how much
the enemies of tax justice fear the “power” of our
analyses. But our shoe-string budget has never come
close to the giant sums spent by the loophole lobbyists
and the tribunes for the rich that we do battle with every
day.
• Playing Defense & Offense in the States— Cover Story
• The Tax Reform Battle in My Own Back Yard — Page 4
• Tax Reform Progresses in 2013 Despite Washington’s Dysfunction— Page 5
That’s why we depend on you, and why we hope you’ll
think of us when you make your year-end donations.
• CTJ & ITEP in the News: Year in Review — Pages 6 & 7
The staff of CTJ & ITEP wish you a great holiday season and a happy, healthy 2010!