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    Entries in tax policy (3)

    Thursday
    Nov032016

    A Sneak Peek at the Seismic Shift in Corporate Tax Breaks

    New rules are forcing states and localities to calculate how much revenue they’re losing to business deals -- and whether they pay off. It’s something Washington state has been doing for a decade.
    BY  NOVEMBER 2016

    Earlier this year, Washington state lawmakers got a wake-up call. A tax incentive package they’d approved in 2013 for aerospace giant Boeing -- largely regarded as the most expensive incentive deal in history -- was actually on pace to surpass its estimated $8.7 billion cost. According to a Department of Revenue report, the deal, which extends to 2040, had already amounted to half a billion dollars in giveaways in just the first two years alone. In other words, the state was losing out on a whole lot more money than it had planned.

    And the kicker? Just months earlier, Boeing had announced plans to cut roughly 4,000 jobs in Washington. The year before, the company had transferred thousands more jobs out of the state.

    Some lawmakers were livid, openly contemplating whether the state should consider revoking the tax breaks if the company didn’t add back some jobs. (Boeing, for its part, says it has continued to invest in the state, including $1 billion last year for a plant to build its new 777x aircraft.) But on the whole, response from officials and local media was measured. Most lawmakers said that in the bigger picture, the company was still good for Washington.

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    Monday
    Oct102016

    The China Factor in America's State and Local Economies

    As the world's second-largest economy falters, pensions and tax revenues here are feeling the pinch.

    BY  AUGUST 2016

    Earlier this summer, New York state’s pension fund announced a mediocre year. Investment earnings were essentially flat, and as a result the fund lost $5 billion because its other receipts -- contributions from government and from current employees -- didn’t cover retiree payouts.

    The New York pension system was the victim of a global event that began halfway across the world a year ago this month. In August 2015, the world’s second-largest economy officially began to stumble. China’s central bank stunned investors by devaluing the yuan, lending credence to what outsiders had long been suspecting: China’s years of astounding annual economic growth -- at times cresting at double digits -- was slowing down.

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    Monday
    Jan042016

    The Curious Case of Disappearing Corporate Taxes

    Over the past two decades, corporations have doubled their profits but contributed increasingly less to state revenues. Where is all the money going?
    BY  JANUARY 2016

    When Rick Snyder became governor of Michigan in 2011, his state had been on a 10-year economic slide -- businesses were leaving and so were people. Where the rest of the country saw growth in the first two-thirds of the 2000s, Michigan’s fiscal health was slip-sliding away.

    Reversing a slide is difficult, and Michigan’s governor and legislators focused a good chunk of their turnaround efforts on taxes. They wanted to reform the tax code so that it would lure businesses and generate the revenue needed to underwrite the kind of quality services that make people want to live there. Snyder’s first step was to ask the legislature to slash business taxes. Within months, lawmakers repealed the unpopular and complicated Michigan Business Tax -- though businesses could opt to stay with parts of the old system and its arcane web of credits and rebates. That isn’t all the legislation did. The new tax law created a flat 6 percent tax that only certain types of corporations paid on their income. Talk about simplification: Nearly 100,000 businesses no longer had to file corporate returns.

    Michigan has made economic progress since the 2011 tax reforms were passed. The population has stabilized, and the state ranks fifth in the country in job creation. Earlier this year, Michigan’s bond rating was upgraded, an affirmation of a more stable fiscal environment.

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