3 Policy Priorities to Defend Workers & Families in 2013

Combined Reporting

Balance state budgets by closing corporate loopholes, not by cutting government services families depend on.

Wage Theft

Protect workers from payroll fraud and boost the local economy.

State Development Banks

Leverage state resources to spur job growth effectively – an alternative to the failed policy of trickle down economics.

Combined reporting requires multi-state corporations to report profits from all entities, including subsidiaries, for tax purposes. This restricts tax avoidance strategies and nullifies certain tax shelters, preventing multi-state corporations from avoiding paying the taxes they owe.

Combined Reporting: Closing Corporate Tax Loopholes

Send $30 million in trademark licensing fees to my Passive

Investment Co. in DE, which doesn’t tax

intangible property, such as trademarks.

What is combined reporting?

$70 m in revenue in CT

- $40 m in expenses in CT

$30 m in taxable profit in CT

$0 in corporate income taxes to

CT

• Fairness: A February 2012 survey of small business owners conducted by American Sustainable Business Council, Main Street Alliance, and Small Business Majority found that ¾ of small businesses say “their small business is harmed when loopholes allow big corporations to avoid taxes.”

• The revenue is needed: With many state budgets facing shortfalls from the recession, it’s time to make sure that multi-state corporations are paying their fair share of state taxes. A Citizens for Tax Justice and the Institute on Taxation and Economic Policy analysis found that 252 Fortune 500 companies avoided paying over $41 billion in state taxes by using other loopholes. States that adopt combined reporting would see an increase in corporate tax revenue of 10-25%.

Why Combined Reporting?

Combined Reporting Adoption

States and cities spend about $70 billion a year in the name of economic development. Much of it is meant to attract large employers from other states. Rather than create new jobs, it creates a race to the bottom in tax fairness and corporate accountability.

State Development Banks

98% of new jobs are created by small business startups and existing business expansion. Wall Street banks have cut back on small business lending by more than double the cutback in overall lending.

How states bank without a State Development Bank• Most states contract with numerous banks, mostly large

Wall Street banks, for a variety of financial services. • The state pays fees for a range of bank services and

receives interest on deposits. • Most of the state money on deposit with these banks is

invested in out of state ventures, doing very little to grow the economy in your state.

What a State Development Bank Would Do• A state bank would provide the opportunity to leverage the

state’s financial resources, increase lending to businesses in your state and reduce your state’s banking expenses while directly contributing to your state’s general revenue.

State Development Banks

State Development BanksInvest your state’s tax dollars in your state! A state development bank invests your state’s cash reserves – potentially billions of dollars – in businesses in your state, stimulating the local economy.

Substantially increase lending without increasing state investment. Unlike an economic development loan from a state agency, a state bank can make $100 million in loans from $10 million in capital, increasing loan volume ten-fold. Net Loans in Small & Medium Sized Banks $31,215,065,500

Percent Increase in Loans due to State Bank 8.2%

Increased Amount of Total Loans $2,559,635,371

Small Business Jobs Created due to State Bank + 8,212

State Development Banks

• Fund economic development without tying up state resources.

• Save taxpayers dollars.

• Generate revenue without increasing taxes.

State

Projected Net Revenue (2009)

% of 2009 deficit

ND $30 million [surplus]

CA $1,775 million

10%

HI $61 million 10%ME $48 million 5%MD $263 million 13%MA $351 million 13%MI $368 million 18%NH $58 million 16%NM $77 million 23%OH $453 million 15%OR $155 million 7%PA $532 million 13%VT $24 million 7%WA $310 million 15%

State Development Banks

Wage Theft

Wage Theft

Wage theft is the illegal underpayment of wages. It was already a major problem before the recession.

Wage Theft creates a de facto sub-minimum wage

• Costs workers 15% of earnings, on

average• $7.25/hour = $6.16/hour after wage theft

2008-09 survey of low-wage workers in Chicago, LA & NYC

•64% suffer wage theft each week

•26% paid less than minimum wage

•76% rate of overtime violations

Wage Theft

Common to Low-Wage SectorsRetail ∙ Food Service & Hospitality ∙ Construction

Warehousing ∙ Domestic Work & Child Care ∙ Day Labor

Types of ViolationsMinimum Wage & Overtime ∙ Illegal Paycheck Deductions

“Off-the-Clock” Work & Meal Break Violations ∙ Tip Stealing

Inadequate Enforcement + Poor Laws = Crime Wave

Ratio of US DOL Investigators to Private Sector

Workers

Wage Theft

• New PSN report on state wage theft laws• 44 states & DC receive failing grades

Wage Theft

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Progressive States Network Policy Resources