Why Small Business Should Support Closing Corporate Tax Loopholes

Corporate Tax Revenue Supports the Local Economy

All businesses rely on an educated workforce and on an infrastructure that supports their ability to grow. Taxpayer investments in quality public education and transportation, in healthcare, in roads and highways, in police and fire services, in child care for workers, and in locally-based research and business incubators all support the needs of business.

•  Corporate income taxes are often the main tax paid by large out-of-state owners for these public benefits enjoyed by their companies.

•  Corporate income taxes paid by large corporations should help to offset the regressive property and sales taxes paid by small businesses and by middle and low-income families.

Large Corporations Fail to Pay their Fair Share :

A 2005 study by Citizens for Tax Justice (CTJ) found that 252 of America 's largest corporations failed to include two-thirds of their U.S. profits on state tax returns, avoiding an estimated $41.7 billion in state corporate income taxes over three years. In Rhode Island, corporate income taxes declined by 57% between 1989 and 2003 – 17% more than the national average. (source: CTJ) Rhode Island's corporate taxes are among the lowest in the country, ranking 42 nd in the nation for collection of corporate taxes as a percent of private sector gross state product. ( Ernst & Young, Feb. 2007 )

•  T he 57% decline in Rhode Island 's corporate taxes is partially the result of abusive tax avoidance strategies – popularly called corporate tax loopholes – used by large multi-state corporations. Those benefiting are mostly “big box” retailers here to sell to Rhode Islanders.

•  Corporate tax loopholes are not generally available to small, locally owned businesses and thus add to the competitive disadvantages small retailers and other small businesses face in the marketplace.

•  The decline in corporate tax revenue means that individuals and small businesses must pay a bigger share of the tax pie.

•  The decline in corporate tax revenues contributes to the state's structural deficit, estimated at $360 million combined for Fiscal years 2007 and 2008.

Closing Loopholes is Good Economic Policy

•  Rhode Island 's locally owned businesses deserve a more balanced and level playing field when it comes to investing in our state's shared infrastructure.

•  The state's over-reliance on cutting services that Rhode Islanders depend on is costing more than we can afford in both human and economic terms. Growing disparities in income, access to healthcare, affordability of housing and child care, as well as cuts to community services for our elderly and disabled mean that Rhode Islanders have less disposable income to spend on goods and services provided by small business, and struggle more to pay for basic necessities.

Corporations in Rhode Island evade at least $12 to $25 million a year in state taxes when they use passive investment companies to shift income to states where they will not be taxed at all.

Please, take action !

Call (401) 463-5368 or visit www.prioritiesri.org