Combined reporting is an important means of determining fairness in how taxes are levied on mostly large, multi-state corporations to ensure that they pay their fair share in helping support the pressing needs of our state. Along with Senator Ray Lesniak and Senator Paul Sarlo, I'm a sponsor of combined reporting legislation here in New Jersey, a measure that treats multi-state corporations and their tax-shielding subsidiaries as one entity.
By Linda R. Greenstein
What's fair is fair.
It's a maxim that many of us can remember from as far back as our childhoods, and which we still call to mind decades later as fair-minded adults.
And it's this simple phrase that motivates me to advocate for a bill called "combined reporting," which would prevent multi-state corporations from shifting profits earned in our state to other states that have lower corporate tax rates or no corporate taxes at all.
Combined reporting is an important means of determining fairness in how taxes are levied on mostly large, multi-state corporations to ensure that they pay their fair share in helping support the pressing needs of our state. Along with Senator Ray Lesniak and Senator Paul Sarlo, I'm a sponsor of combined reporting legislation here in New Jersey, a measure that treats multi-state corporations and their tax-shielding subsidiaries as one entity.
Estimates for what is currently being siphoned from the New Jersey Treasury as a result of our current tax system run from a conservative $200 million per year to more than $400 million.
To be sure, New Jersey, with its 9 percent corporate income tax, is not an outlier in taxing corporations. Fully 45 of the 50 states impose a corporate business tax. But more than half of those states - 25 and counting -- have smartened up to the corporate tax dodge of profit shifting and require combined reporting from companies when filing their corporate income taxes.
New Jersey Policy Perspective, a Trenton think tank, brought the combined reporting issue to the attention of policymakers and the public with a report last June.
The think tank uses the example of one retail giant markedly reducing profits earned in New Jersey (and taxes paid here) through a nifty little store rental scheme whereby rents are paid to subsidiaries and corporate profits end up in Delaware, where famously and conveniently, there is no corporate business tax. That amounts to a corporate rip-off of the New Jersey taxpayer.
Senator Lesniak, the lead sponsor of the bill, points out that still another corporation -- oil giant ExxonMobil -- has paid a corporate tax rate of just 2.4 percent to New Jersey over a five-year period ending in 2014.
By closing this loophole, we would end unfair -- and often unscrupulous -- tax avoidance on the part of multi-state (and in many cases multi-national) companies. In short, it's not a tax increase we're after, it's tax fairness.
After all, New Jerseyans spend their hard-earned tax dollars with these companies. And our residents pay property taxes and other tax dollars to educate a top-notch workforce that the companies draw from while maintaining a sound business environment through our state's infrastructure, from roads and bridges to police and fire services. It's only equitable that profits earned in the Garden State by these companies are not then secreted out of the state like a stuffed burglar's sack in the night.
And we all know just how badly funds are needed to maintain the quality of life our state offers its corporations and its residents - from a near empty Transportation Trust Fund that needs replenishing, to increasing school aid to help offset burdensome property taxes, to making good on promised payments to our badly underfunded public worker pension systems.
The $2.6 billion raised by the corporate business tax represents nearly 8 percent of the total state budget and is our spending plan's third largest source of revenue, behind only personal income taxes (41 percent) and the sales tax (27 percent). Together these three sources account for 75 cents of every $1 in the budget.
New Jersey's business tax base has already been eroded by Governor Christie, who has given away more than $2 billion worth of corporate tax credits since taking office in 2010. More losses will only lead to a greater burden placed on other taxes and taxpayers.
Among those recognizing the current inequities of enabling multistate corporations to shift profits out of state is the Main Street Alliance, an organization representing 1,500 independent and small businesses. At a recent State House press conference, representatives of the group expressed their support for the legislation as a means of leveling the competitive playing field with giant corporations.
Hearing their position put me in mind of the old axiom from my youth, where if someone was getting an unfair advantage, the others would surely holler out: "Hey, what's fair is fair."
It's in that spirit that Senators Lesniak, Sarlo and I urge our fellow lawmakers and residents throughout New Jersey to join us in the name of fairness and support this important legislation for the betterment of our state.
Linda R. Greenstein is a senator representing parts of Mercer and Middlesex counties in the 14th legislative district.
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