INDIANAPOLIS – Gov. Mike Pence has spent months pushing the idea of repealing the tax on business equipment that provides $1 billion per year to schools, libraries and local governments. He’s yet to come up with a plan to replace those lost tax dollars. Pence argues that freeing businesses from the burden of taxes on their equipment will spur growth. That, in turn, will lead to prosperity that will boost the fortunes of local communities.
Elkhart County Commissioner Mike Yoder has another idea. To replace the tax revenue lost by the locals, the state should go after dollars lost to offshore tax havens used by businesses.“Why aren’t we recouping some of that tax revenue?” Yoder said. “The state could go after that money and turn it over to the locals as replacement revenue.”It’s a question asked only half in jest. According to a new report published in Governing magazine, state governments failed to collect more than $20 billion in taxes in 2011 from corporations that socked away money in the Cayman Islands and other well-known tax havens.
The report, by the U.S. Public Interest Research Group, identified 31 states that saw more than $100 million in corporate tax revenue go uncollected in 2011. Indiana is one. According to the report, it lost $463 million to offshore tax havens.
Only two states, Montana and Oregon, have passed laws to recoup some of that money, by requiring companies to report profits from subsidiaries in foreign countries known for their tax-dodging loopholes. The PIRG report speculates on one reason that more states haven’t moved: Well-funded business groups employ ample resources to oppose tax reforms.
Whatever is behind Indiana’s losses to offshore tax havens, the proposal from Yoder is compelling for another reason.
The county commissioner is a fiscally conservative, business-supporting Republican – just like the governor. He too wants to see prosperity return to his community, which was hit hard by the recession that cut deeply into his county’s manufacturing economy.