Mainers work hard to support themselves and their communities. They pay taxes to fund the services communities need to thrive, like education, health care, and infrastructure. But it is increasingly clear that big corporations aren’t holding up their end of the bargain by contributing their fair share. They deploy complicated tax loopholes and accounting schemes to avoid paying what they owe, using their money and power to ensure laws in place don’t expose the tricks they’re playing.
Research shows big corporations aren’t paying their fair share
A steady flow of research paints a picture of how extensive the problem of corporate income tax avoidance really is. A new report released by the Institute on Taxation and Economic Policy found in the five years following the 2017 Trump corporate income tax cuts, 109 of the biggest corporations in the US paid $0 in federal taxes in at least one year.1 The Economic Policy Institute found in seven states, 60 percent of corporations paid $0 in state income taxes.2 Researchers were able to determine the extent of corporate income tax avoidance through review of public Securities and Exchange Commission (SEC) filings, and from requests for aggregate tax data from individual states. In addition, we know the IRS has pursued tax avoidance by some of the worst offenders, including Microsoft, who owes $29 billion in back taxes resulting from tax avoidance schemes.3
Lack of state level data means we have no way to track the impact of corporate tax avoidance and tax subsidies in Maine
There is no data made available at the state level, like that in public federal SEC filings. As a result, we’re unable to determine what the picture of corporate tax avoidance looks like in Maine. In addition to tax loopholes and accounting schemes used by corporations, each year the state gives away millions of dollars in subsidies to businesses in the form of tax breaks and incentives. Businesses that ask for public funds should give the same information to Maine legislators and taxpayers that they give to their shareholders. Mainers should know if the businesses they are subsidizing with their tax dollars are paying taxes.
LD 1337 will help shine a light on corporate tax avoidance in Maine
LD 1337, sponsored by Rep. Ann Matlack, seeks to shine a light on corporate income tax avoidance and received bipartisan support in the Taxation Committee. LD 1337 was amended by the Committee to require Maine Revenue Services (MRS) to report aggregate corporate income tax data for the largest corporations doing business in Maine on a biennial basis starting in January 2025. MRS stated along with other reports they provide, this report would help provide a good snapshot of the revenue system in place, what the strengths and weaknesses are, and provide good information to help the Committee make decisions.4
The amended bill was a compromise that considerably pared back the amount of data requested in the original bill, which would provide a more comprehensive picture of the extent of income tax avoidance for individual corporations by requiring them to file annual corporate income tax disclosures. Maine is one of several states that have attempted to get more information to expose corporate income tax avoidance. LD 1337 is a good first step, and more data is needed to fully understand the scope of corporate tax avoidance in Maine.
Mainers will be better off with greater corporate transparency and accountability
Whether our tax system is functioning as intended — with everyone paying their fair share — is a core principle of tax policy and tax fairness. The data provided from the report required by LD 1337 will give legislators a better sense of what wealthy corporations are contributing in Maine and help us determine how we can improve our tax system to benefit all Maine people and communities.
Mainers deserve transparency about whether corporations are contributing to their shared prosperity. Corporations rely on our tax dollars to pay for things they use — our roads, ports, and educated workforce — to make their profits. It’s only fair that they pay what they owe into the system, the same as hardworking Mainers and small businesses.
Notes:
[1] ITEP: Corporate Tax Avoidance in the First Five Years of the Trump Tax Law
[2] EPI: Reclaiming corporate tax revenues
[3] ProPublica: How a Maneuver in Puerto Rico Led to a $29 Billion Tax Bill for Microsoft
[4] LD 1337 work session, Committee on Taxation, Maine State Legislature, 28 Feb 2024.
