Policies like the ones in place in Montana and Oregon (and, potentially soon in Maine) involve three basic steps, as we’ve reported in the past:
- Identify known tax havens. As it stands, many states only require businesses to report profits up to the “water’s edge” — or within the United States. To fix that, states would first need to identify known tax havens. Fortunately, several groups, including the National Bureau of Economic Research and Internal Revenue Service, already do this. States could easily rely on these lists.
- Make businesses report income of subsidiaries in those havens. The federal government already requires this, so it wouldn’t be much of a stretch for states to add this mandate, US PIRG argues in the report.
- Pick a formula to calculate how much of that income should be taxed. States don’t want to tax national corporations 50 times on all income, so they’ve devised formulas to calculate what share of a multi-state business’s income can fairly be taxed. These same formulas could be used to calculate the same for foreign income.
In its January report, U.S. PIRG calculated how much in revenues a number of states could recover. Its estimate for Maine was $7.2 million, but state Senate Democrats peg the expected amount of potential revenues at $10 million.
State tax revenue had recovered from the recession during the second quarter of last year, but revenue in Maine and Montana is still more than 3 percent below its recession peak. Revenue in Oregon has fully recovered and is more than 1.5 percent above the peak.
Article Appeared @http://www.washingtonpost.com/blogs/govbeat/wp/2014/04/03/how-maine-hopes-to-recover-10-million-a-year-from-tax-havens/