The Next Debtpocalypse: Fiscal Meltdowns in the States

from Mother Jones:



Fri Aug. 12, 2011 3:00 AM PDT


With the dust settling after the debt ceiling fight, Republicans—along with a few Democrats—are moving on to their next agenda item: blocking states from collecting millions in much-needed tax revenue from corporations.

The Business Activity Tax Simplification Act, or BATSA, passed out of the House Judiciary Committee in early July and is set to be taken up by the full House when Congress returns from its August recess. The bill, which is sponsored by Rep. Bob Goodlatte (R-Va.), would forbid state and local governments in the 44 states that collect corporate income taxes from taxing a sizable chunk of corporate profits. How sizable? The nonpartisan Congressional Budget Office, which scored a previous version of the bill in 2006, estimated that state revenue losses would explode to $3 billion annually within five years of enactment. Michael Mazerov, a senior fellow at the Center for Budget and Policy Priorities, says BATSA's current incarnation protects an even larger portion of corporate profits than the earlier bill, so state revenue losses could be even higher than the CBO projected. And here's the kicker: since no federal revenue is lost in the process, it's no skin off the backs of lawmakers in Washington.

The basic theory behind BATSA is that states shouldn't have the right to tax companies with permanent headquarters located in other states. The current bill allows for taxation of businesses that have employees within a state for more than 15 days, but that exception is actually very easy to avoid. Consider a bank with branches in multiple states that, like most major commercial banks, is an active player in the mortgage loan business. These kinds of banks often hire independent contractors to process mortgage applications. But under BATSA, a state wouldn’t be able to tax the bank for profits it reaped within its borders, because the contractors wouldn't count as "employees."

Congress has considered some version of BATSA every year since 2000. Each time, a coalition of groups—the National Governors Association, the Multistate Tax Commission, and a combination of state and local organizations and public employee unions—have managed to beat it back. But the tide could be turning. After the bill's markup in July—just the second time BATSA has made it out of committee—Americans for Tax Reform, Grover Norquist's anti-tax advocacy group, rejoiced. .............(more)

The complete piece is at: http://motherjones.com/politics/2011/08/post-debtpocalypse-triggering-fiscal-meltdowns-states