“Fair Taxation” Group Sees Bills Put Aside, Still Calls For Tax “Loophole” Closure

A group pushing for a more progressive tax system in Tennessee had a handful of its proposals put on hold in the legislature Wednesday, but the group is still hoping lawmakers will close what it says is a corporate tax loophole.

Tennesseans for Fair Taxation have lobbied to have the sales tax taken off food and to pass a progressive state income tax.

At least four of its bills were deferred indefinitely in Senate or House committees, in recognition that lawmakers won’t pass significant new taxes this year.

Lobbyist Bill Howell says his group is still urging passage of parts of the governor’s “technical corrections” bill, the annual measure that closes tax loopholes.

The group wants what’s called “combined reporting” -making companies pay taxes on profits they make in Tennessee, rather than shifting those profits to other states. This year’s “technical corrections” bill would require combined reporting for only real estate investment trusts

Howell says that’s a start. He says legislative number crunchers say it would bring in an additional $10 million.

“I think that’s low. And our estimates from other states that have switched to combined reporting indicate that it generally brings about an increase of 10 percent in the corporate income tax revenues.”

Howell says if all companies had to comply, that could bring in an additional $80 million.

WEB EXTRA
This is an example of the types of bills backed by the Tennesseans for Fair Taxation (TFT). As today’s news conference by TFT was going on, this bill was being “taken off notice” in the House Government Operations Committee, a recognition that the bill is dead.

HB3596 by *Turner J, *Jones U, *Miller L, *DeBerry J, *Pruitt, *Camper. (*SB3236 by *Tate.)
Taxes – As introduced, enacts the “Tax Cut and Job Creation Act.” – Amends TCA Title 3; Title 4; Title 5; Title 6; Title 7; Title 8; Title 9; Title 12; Title 16; Title 30; Title 36; Title 39; Title 40; Title 45; Title 47; Title 48; Title 55; Title 56; Title 57; Title 61; Title 62; Title 67; Title 68; Title 69; Title 70 and Title 71.
Summary for HB3596

Howell, the expert on day-to-day maneuvering on taxes on Capitol Hill, says combined reporting would be a logical next step in tax reform. Many states already require such transparent recording, not allowing companies to hide profits in low-tax states.

“For Tennessee, our corporate income tax last year produced, I think, about $800 million. So it would produce about 80 million [dollars]. And actually it was a range of 10 percent to 25 percent, so it could be as much as $200 million.”

Another TFT advocate, David Lyle, promoted the “Internet Parity law,” which also has only minimal chances this year. Currently companies who don’t have a physical presence in Tennessee don’t have to collect sales tax on goods they sell to persons in the state.

This has been addressed in the long-sought (still unfulfilled) “streamlined sales tax act,” which would tax all Internet purchases. Howell talks about how the Internet Parity law is different.

“It is…it is different from the streamlined sales tax act, in that that would require the vendors to collect and remit the taxes. In this case, we’re asking the users to pay the taxes, but we’re asking the vendors to provide the consumers with the information that they need in order to file a return.”

In other words, the seller would send each customer a list of his purchases at year’s end and the Tennessee consumer would use that to voluntarily pay the sales and use tax due to the state.

Tennesseans for Fair Taxation argue that the state’s sales tax is unfair to low-income people who must spend most of their income for daily living expenses, almost all taxed.