The Defeat of Oregon’s Measure 97

Portland Oregon Corporate State Tax
Oregon Tax Issues

On November 8, the state of Oregon declined to pass through an initiative which would have severely impacted corporate tax rates. The initiative – known as Measure 97 – was targeted toward Oregon-based C corporations which brought in upwards of $25 million in gross sales in a single year. Corporations bringing in $25 million or less would have been unaffected by the measure.

Measure 97 would have compelled C corporations (with sufficient gross sales) to pay an additional tax of 2.5 percent on top of their original rate. However, businesses classified as “benefit companies” – meaning a business which has aims to either help the community or the environment – would have been exempt from the extra tax even if they brought in sufficient revenue.


Oregon currently has no sales tax and also has one of the lowest state corporate tax rates in the union. Proponents argued that Measure 97 was a logical step to bring Oregon’s tax policy closer in line with other states. Supporters of the initiative also argued that the increase was needed to raise funds for a variety of public projects, including education and healthcare. If the measure had succeeded at the ballot box, Oregon would have likely received an extra $3 billion annually in tax revenue.


Measure 97 was shot down by a clear majority of voters; the initiative received 1,141,677 votes for “no” and 792,094 votes for “yes” (or 59.04 percent vs. 40.96 percent). Opponents cited the fact that the new state corporate tax rate imposed by the measure would have been among the highest in the country.

Interestingly, the battle over Measure 97 was the most expensive ordeal in Oregon’s history. Supporters and opponents of the bill raised a combined total of approximately $42 million in preparation for the ballot.

Measure 97 certainly would have given the state pocketbook a large boost. However, too many people saw its flaws and so Oregonians will have to think of another way to address shortages for public needs.

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The Cost of Starbucks’ Dutch Connection

Starbucks Dutch Tax Haven

Back in October of 2015, the European Commission ordered the Dutch government to recover approximately €30 million (or about $34 million) from Starbucks. The EC determined that the arrangement made between the two entities was illegal and had given Starbucks an unfair advantage in the marketplace. The Netherlands and Starbucks are expected to appeal the decision.

The EC ruling is significant for a number of reasons. For one, it brings attention to the complex maneuvers multinational corporations employ in order to receive the best tax treatment. And it also highlights how serious the European Union has become in its efforts to crackdown on tax avoidance. While the sum that the Dutch government is required to recover in back taxes is not outrageously large, the decision may prove to be extremely important as a portent of future events.

The Decision

The European Commission found that the tax deal made between the Netherlands and Starbucks enabled the multinational coffee company to shift profits and dramatically lower its tax burden. Through its ruling, the EC intends to shut down the tax avoidance strategies utilized by large companies. Such strategies are usually highly sophisticated and unavailable to start-up companies and small to medium sized businesses. Hence, even though Starbucks maintains it didn’t violate any established rules, the arrangement compounds the preexisting economic advantage Starbucks already possesses.

Although it may be tempting to immediately side with the EC, it should be kept in mind that EU states face an increasingly competitive world and tax deals are just one means to attract foreign investment. And if Starbucks is able to employ complex tax strategies which give it an advantage, perhaps this is just a natural consequence of how the market works? And besides, even if this ruling curtails tax avoidance strategies in the short-term, what guarantee exists that companies will not respond with even more creative strategies in the future?

Starbucks may be stuck with a sizable tax bill, but the days of sophisticated tax structuring are far from over.

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The New Connecticut State Budget

Connecticut State Budget
The State of Connecticut

Back in May, the state government of Connecticut approved a new budget with the goal of fixing a deficit of approximately $960 million. The budget – which was proposed by the Democrats – did not raise taxes but instead addressed the deficit through various spending cuts and layoffs. General fund spending was cut by $821 million, hospital funding was cut by $43 million and state grants to non-profit industries which provide addiction and mental health services were cut by roughly $8.7 million.

The budget took effect on July 1. Opponents stress the cuts to the medical and non-profit industries and highlight the impact of such cuts on Connecticut families. Supporters emphasize the absence of tax increases and point to the fact that difficult decisions were inevitable in order to balance the budget. Though certain negative effects will undoubtedly ensue, the Democratically-sponsored budget was in fact the lone option as the Republicans failed to put forth an alternative proposition.

When the budget passed, Connecticut governor Dannel P. Malloy foresaw as many as 2,500 state jobs being eliminated. Some of these eliminations would result from retirements and other forms of voluntary resignation. The layoffs were projected to occur across a broad range of employment sectors including education, law, medicine and others as well. The layoffs have sparked protests and heated opposition from union leaders. Lori Pelletier, president of the Connecticut AFL-CIO, went so far as to say the following: “A vote for this budget is a vote for laying off rape crisis counselors, corrections officers, nurses, mental health workers, and teachers.”

Though it is certainly not without its unattractive elements, the new state budget of Connecticut appears to be on path with projections and should lead to a balanced fiscal situation in 2017. Connecticut state revenue derives from various sources, several of which are rather volatile, and so only time will reveal whether these projections turn out to be correct. When budgets are greatly off-kilter – as was clearly the case with Connecticut’s budget prior to the passing of this new plan – easy solutions are often impossible to come by. Hopefully economic growth can help relay former state employees into well paying new jobs.

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Apple’s New Tax Bill

Apple Company Tax Bill
Apple Logo

The European Commission has recently ordered multinational tech giant Apple, Inc. to pay €13 billion to Ireland to settle back tax debt. The EC concluded that the deal made between Apple and Ireland was illegal and aided Apple in avoiding its proper tax liability. Though it is not the largest corporate back tax bill by a long shot, this tax bill will certainly spell substantial changes in the way Apple conducts its tax affairs.

Commissioner Margrethe Vestager determined that the Irish deal enabled Apple to pay an effective tax rate of just 1 percent on its European profits in 2003, and that this sunk to just 0.005 percent in 2014. The European authorities have put Ireland in charge of recovering the €13 billion (approximately $14.6 billion) from Apple.

This new tax bill can accurately be perceived as an inevitable consequence of Apple’s practice of using creative accounting strategies to avoid tax obligations.


Apple has used three primary methods to minimize its tax burden: deferral, transfer pricing and check-the-box. Deferral simply allows U.S. firms to avoid paying U.S. tax on income earned abroad until it is physically returned to the states. In reality, companies often keep international earnings offshore indefinitely and thus avoid paying tax altogether. Transfer pricing is a bookkeeping method used by companies to distribute expenses among their affiliates. Apple is able to utilize transfer pricing to its benefit by charging small fees to foreign subsidiaries for use of its intellectual property; in this way, Apple maximizes the profits of its affiliates and minimizes its intellectual property income in the U.S. Check-the-box allows firms to classify their affiliates as “disregarded entities” which are not subject to U.S. income tax.

The deal struck with Ireland further enhanced the effectiveness of these strategies. Apple set up two entities in Ireland through which it was able to channel two-thirds of its pre-tax global income. The income which passed through these Irish entities did not return back to Apple but was instead routed to the U.S.-based bank accounts of these entities. This allowed the income to avoid U.S. tax.

Final Thoughts

The European Union is trying diligently to crack down on faulty agreements between multinational firms and EU member states. European authorities have already ordered the Dutch government to recover €30 million from Starbucks and demanded that Luxembourg recover roughly the same amount from Fiat Chrysler. Both Amazon and McDonald’s are also likely to face similar treatment in the near future as a result of their dealings with Luxembourg. Though creative accounting will almost certainly continue well into the future, it appears that European authorities will take an increasingly aggressive approach to enforcing EU tax laws.

Apple certainly has the cash to settle its tax bill. And its relationship with Ireland is likely to suffer little as Ireland still has a relatively low corporate tax rate of 12.5 percent. However, it seems clear that Apple will have to employ cleverer strategies in the future in order to dodge the European taxman.

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The Basics of the Google Tax Quandary in the U.K.

Google Tax UK
Google Logo

With total earnings of approximately $74.5 billion for 2015, Google is truly a multinational corporate juggernaut. International sales constitute a substantial portion of Google’s overall revenue source. Presently, sales in the United Kingdom make up about a tenth of Google’s entire income. In recent years, a controversy has developed over Google’s supposed attempts to divert profits in an effort to avoid paying the typical corporate tax rate for U.K. sales. The standard corporate tax rate in the United Kingdom is 20 percent. By way of a host of creative strategies, Google has historically paid nothing close to this rate. Two recent developments — a settlement regarding Google’s back tax debt and a law passed by the British parliament — have helped create a measure of progress, but the matter remains far from fully resolved.

In the last three years, Google has managed to keep its effective tax rate on foreign (i.e. non-U.S.) profits at 6.6 percent. There appears to be some uncertainty over the exact rate paid by Google in the United Kingdom: some allege the rate is as low as 2.5 percent, although Matt Brittin, Google’s president in Europe, states that the rate is much higher.

Back Tax Deal

In January of 2015, a settlement was reached regarding Google’s past tax liability stretching back to 2005. Google agreed to a sum of $130 million (approximately £190 million). While many cite the deal as a clear triumph for the British government, many others see it as overly gentle on Google. Though the issue of profit shifting still lingers, this settlement brought at least some degree of satisfaction for the U.K.

Diverted Profits Tax

In its Finance Act of 2015, the British government included a provision called the Diverted Profits Tax — informally referred to as the Google Tax — which attempts to shut down the improper shifting of profits to offshore tax havens. In the past, Google has avoided paying the standard corporate tax rate on most of its U.K. profits due to its practice of shifting these profits to other venues, primarily Bermuda. The Diverted Profits Tax will attempt to halt this practice and implement a 25 percent tax rate on funds being shifted in this fashion.

There is uncertainty whether Google will comply with the law as Google contends that it already pays its fair share of taxes in the U.K. Only time will reveal precisely how the matter will be settled.

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The Dire Condition of Kansas’ State Budget

Kansas State Budget
State of Kansas

In 2012, Kansas governor Sam Brownback and the state legislature passed a measure to reduce state income tax rates for all Kansans and eliminate income tax for some 300,000 LLCs. Brownback and his fellow statesmen reasoned that such a measure would re-energize the state economy and promote job creation; neither Brownback nor any of the legislators believed that such a reduction would have a net negative impact of the state pocketbook. As it turns out, the cuts — which only took effect in 2014 — have led to a massive downfall in tax revenue and prompted a variety of new measures in order to cover the shortage.

The figures for the most recent fiscal years show the extent of the problem with unmistakable clarity. In 2013, the state of Kansas brought in $2.931 billion; this was a modest increase from the $2.908 billion which was collected in 2012. In 2016, Kansas collected a startlingly low $2.249 billion. To put it differently, as a result of the cuts, in 2016 Kansas collected roughly $650 million less in individual income tax dollars than in every year prior to the passing of the cuts. Though all positive intent may be imparted to him, the governor’s actions have created a distressful predicament for the state’s budget.

Kansas has actually lost 700 jobs over the course of the past year and currently ranks sixth worst in the nation in terms of rate of job growth. In response to the revenue downfall, the state has been compelled to divert more than $1 billion away from road improvements, implement a sizable sales tax increase, slash tens of millions of dollars from higher education and exhaust all of its cash reserves. Though they were intended to promote economic growth, given the consequences which have followed it is impossible to call the tax cuts of 2012 anything but a failure.

The governor has attempted to downplay the role of the tax cuts in creating the financial quandary: he’s alleged that recent financial projections have been overly optimistic, he’s highlighted the poor performance of the farm and oil industries, and he’s also reminded everyone that Kansas brought in more money in 2016 than in 2015. But these attempts ultimately fail to excuse the fact that, so far, the 2012 tax cuts have failed to deliver the benefits he promised and have led to the awful financial situation we see today.

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Alaska’s Current Tax Debate

Alaska Tax Debate
State of Alaska

The decline in oil tax revenue has sparked an important debate among Alaskan policymakers. Historically, Alaska’s oil supply has resulted in surpluses for its state government; now, with oil production on the decrease, state legislators are seeking measures in order to confront the newly created deficit. At this point, the debate has narrowed down to whether Alaska should adopt a state personal income tax or a sales tax. Alaska has been without a state personal income tax for 35 years and it has never collected sales taxes in its entire history.

The Institute for Taxation and Economic Policy (ITEP) released a report back in mid-July which addressed the issue of Alaska’s revenue woes. The report – which was entitled “Income Tax Offers Alaska a Brighter Fiscal Future” – makes the case that implementing personal income taxes for Alaskan residents is the better option. Essentially, the report propounds that adopting a personal income tax is more equitable, more sustainable in the long-term and also more financially beneficial to the bulk of Alaskans.

Though the debate is alive and well, several actions have already been taken. Governor Bill Walker has already made cuts to state spending and substantially curtailed tax breaks available to the oil industry. What’s more, Walker also reduced the maximum amount Alaskans may receive through the Permanent Fund; each person may now receive a maximum of $1,000 rather than the previous maximum of $2,072. The Permanent Fund is a statewide fund established to help ensure that a greater share of the Alaskan population benefits from the state’s oil stock.

Bringing balance to Alaska’s fiscal quandary will be no easy matter. Whatever option is selected, there will be a sizeable bite taken out of Alaskan pocketbooks. The hope is that the settling of Alaska’s revenue problems won’t disproportionately affect lower to middle level income families. So far, with all available evidence taken into consideration, it appears that reinstituting a personal income tax in conjunction with a few other measures is the surest means to provide both an equitable and sustainable financial future. Only time will tell if this is indeed the means which will be adopted.

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The Amazon Sales Tax Dispute

Amazon Logo Tax Dispute
Amazon Tax Dispute

With its seemingly endless number of products, competitive prices and customer focused shipping practices, (Amazon) is truly a commercial force to be reckoned with. Headquartered in Seattle, Washington, is the largest internet-based retailer in the world and, as of 2015, has surpassed Walmart as the most valuable retailer in the United States. Amazon began as an online bookstore but has since broadened its range of products and now offers a wide assortment of goods and services.

For a number of years Amazon has been at the center of a controversy regarding the collection of sales tax from customers. Amazon sells and ships products to customers in every state throughout country but does not collect sales tax in every state. Since it is an ecommerce company, Amazon does not always have a substantial physical presence in the states in which it conducts business and so many state governments lack the capacity to compel Amazon to collect sales tax. Many state governments are attempting to pass legislation which would compel Amazon to collect the tax, but this may cause Amazon to simply cease conducting business in whichever state passes such legislation.

In May of 2011 legislation was introduced in Congress which, if passed, would settle the issue entirely. So far, Amazon has not taken a public stance on the bill.

State Argument

State governments argue that Amazon possesses an anti-competitive advantage in the marketplace over traditional storefront businesses. And since storefront businesses are of course forced to collect sales tax Amazon should likewise be compelled to do the same. In other words, the sheer impact which Amazon has on state economies is reason enough to collect the tax even though Amazon doesn’t always maintain a strong physical presence in the states in which it conducts business.

State governments also have clear financial motivations to impose the tax as well, as sales taxes from Amazon transactions can add up to hundreds of millions of dollars per year in certain states.

Amazon Argument

In order for a business to be required to collect sales tax it must have a physical nexus in the state in question. Amazon contends that this physical nexus is either insufficient or nonexistent in many cases.

In order to sidestep the physical requirements, Amazon has created subsidiaries which are treated separately for tax purposes. Amazon also carefully monitors its relationships with affiliate businesses in order to make sure that its physical presence is kept to a minimum.

Final Thoughts

Both sides of the argument have a degree of merit. Amazon does make it difficult for many local retailers given its status as an internet-based company. But even if a given state passes legislation to compel Amazon to collect sales tax, Amazon may simply remove its activities from that state; this very thing has actually happened before on a number of occasions. Obviously, state governments would love the dramatic rise in revenue which would occur with the collection of sales taxes from Amazon transactions; and Amazon would love to avoid collecting sales taxes since doing so gives it a competitive advantage. Perhaps the matter will only be fully resolved at the federal level.

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The Biggest Tax Fears of U.S. Citizens

Americans have many fears when it comes to filing taxes. One of the most common is missing the tax filing deadline. Everyone is well aware of this date, but many people procrastinate and run out of time. Below is a list of the most common fears related to taxes experienced by Americans.TaxesScrabbleCloseUp

Having to Pay

When you find that you have to pay and are not getting a refund, take a second look at your return. Don’t fear having to pay, look for ways to cut your tax liability. If you have zero options, work out a payment plan with the IRS. While this option does come with having to pay interest and fees, it is actually a less stressful option.


Audits are, perhaps, the biggest fear that American taxpayers have. Audits are scary and can reveal that mistakes were made on previous returns. An audit can result in you owing more than you initially thought. Although rare, an audit can result in a refund if it is found that you shorted yourself.

Higher Taxes

It seems that Americans are paying more taxes almost everywhere, even at a local retailer. Higher taxes should be expected as the U.S. has had so many fluctuations in personal income tax rates over the last decade.


You do not have to have fears about filing and paying taxes. It is something that everyone has to do. Prepare yourself for owing the IRS by putting a little extra away each week. It makes the burden more surmountable later.

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Which Presidential Candidate Has the Best Tax Plan?

As it gets closer to election time, presidential candidates are voicing their tax plans for the American public to stew over. Tax plans on the democratic side seem to be raising taxes across the board. Most republican candidates are simply making adjustments to existing tax brackets.PresidentialRace2016

Individual Income Tax Plans

Ted Cruz seems to have a tax plan that will help more Americans with poverty-level income and those barely making ends meet. He has proposed a 10-percent flat tax on income. Donald Trump and Marco Rubio have established three tax brackets, taxing high earners the most.

Hillary Clinton plans no changes other than a 4-percent surtax for those earning $5 million or more. Bernie Sanders plans to raise taxes with the lowest bracket being 37-percent.

Republicans plan to eliminate estate taxes altogether and democrats plan large increases on estate taxes.

Business Income Taxes

On a corporate level, there is not much discussion regarding taxes. Many candidates have no specific proposal at all. The republican candidates are the only ones with some kind of corporate tax plan. Both Trump and Rubio have proposed lowering corporate taxes. Cruz plans to replace the income tax with a 16-percent business transfer tax.

It is not easy to know precisely which tax plan is best for the American people taken as a whole. Those who are barely making ends meet would not benefit from increased taxes. Lowered income taxes would mean that the economy could flourish because more Americans would have a few extra dollars in their pockets to spend on entertainment, travel and in local economies.

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