February - Tennessee Education Association

Where Has All the Money Gone?
By Melissa Brown
As we prepare to file our taxes, comparing
our effective tax rates with those of
presidential candidates and high networth
individuals, it’s quite easy to
tune into the national conversation
as corporate tax loopholes come
under scrutiny. In discussions about the economy
nationwide, we hear that the fiscal situation at home
in Tennessee and with the federal budget are getting
more dire. The growing income disparity further
erodes the already shrinking middle class, pointing
out the disproportionate burden being placed on
working families. Meanwhile, corporations continue
to exploit loopholes in the tax code and avoid shared
responsibility. The analysis below is an attempt to
answer the question: What is the impact of corporate
tax loopholes?
Lost State Revenue
A December 2011 study by the Citizens for Tax Justice
and the Institute on Taxation and Economic Policy
reported on the state and local income tax payments of
265 profitable Fortune 500 companies.
The report focused on 265 Fortune 500 companies
that fully disclosed their tax payments, finding the
following:
• 68 companies paid no state income tax at all in
at least one year from 2008 through 2010 and 16 of these
companies had multiple no-tax years.
• In 2009, 32 companies paid no state income tax.
• The corporations were able to avoid a total of
$42.7 billion in state corporate income taxes from 2008
through 2010. U.S. profits totaling $1.33 trillion were
reported to shareholders. Paying the 6.2 percent average
state corporate tax rate, the corporations would have
paid $82.6 billion in state corporate income taxes over
the 2008-10 period. Instead, they paid only $39.9 billion.
The companies used in the study operate throughout
the United States. However, these companies do not
disclose profits and taxes on a state-by-state basis, so
the findings do not show conclusively whether specific
companies paid any income tax in specific states.
The Nelson A. Rockefeller Institute of Government
reports that corporate income taxes make up only 5.7
percent of state revenues, which is down from 9.7 percent
in 1980.
Lost Federal Revenue
A November 2011 report by the National Education
Association noted that $222.7 billion of federal revenue
was lost for years 2008 through 2010 due to corporate
tax avoidance. A total of $9.8 billion could have gone to
public schools and colleges nationwide.
How did this affect education funding in Tennessee?
The scenarios below describe how the lost revenues could
have been used to improve our society and potentially
boost the economy.
Lost Federal Dollars for Education and Other Aid
• $200 million in lost federal dollars for education
• Dollars would have supported 2,859 education jobs
• $1,500 lost federal dollars for Other Grants to State
and Localities.
Lost Federal Dollars for Title I Grants
• Would have provided $180 million in grant dollars
that would have benefited 205,296 students in poverty
• Average funding lost per student in poverty: $878.
Lost Federal Dollars for Special Education
• $200 million in lost grant dollars that would have
benefited 119,455 students with disabilities.
Lost Federal Dollars for Pell Grants
• $191 million that would have benefited 148,462
students in need
• Average dollars lost per student in need: $1,286.
Lost Federal Dollars for Head Start
• $170 million in grant dollars that would have
benefited 8,060 additional children in poverty who would
have been enrolled in a Head Start program.
Clearly, the amount of lost state and federal revenues
due to corporate tax avoidance is significant.
The amount of lost federal dollars alone could
have funded or expanded programs for Tennessee’s
children, expanded existing services and provided
education positions for some of Tennessee’s 9.1 percent
unemployed, based on the Tennessee Department of
Labor and Workforce Development November 2011
unemployment rate. At a time when the state continues
its efforts to rebound from the Great Recession, budget
revenues lost through corporate tax avoidance would not
have been a luxury. According to experts who worked on
many taxation studies, a fair tax burden is a necessity
in funding education more appropriately, providing jobs
and lessening the tax burden on the average working
family.
Melissa Brown is TEA manager of research.
Stockpiled, Snow Days
Rules Unchanged This Year
Are school systems still allowed to use
stockpiled days for snow days? TEA received a
number of inquiries from teachers as to whether
the State Department of Education has changed
its policy on the use of stockpiled days for
snow days. The Commissioner of Education has
released the following statement in response to
these inquiries:
“State law allows school systems to stockpile
up to 13 days by increasing the school day up to
30 minutes and to use this excess time to make
up for instruction missed due to dangerous or
extreme weather conditions, such as snow. No
approval is required from the commissioner
provided the excess time is used for this purpose.
Any school system that has adopted a school
calendar with stockpiled days will be able to use
that excess time for snow as it has in the past.
“State law requires the approval of the
commissioner if:
1. A school system is using stockpiled
days for other limited purposes outlined in the
law—natural disasters, serious outbreaks of
illness or dangerous structural or environmental
conditions rendering a school unsafe for use; or
2. Outright waiver of the 180-day
instructional requirement in the event of a
natural disaster or serious outbreak of illness.
“For example, if a school system chose not
to stockpile but then faced an illness outbreak
where students missed a large number of days of
instruction, it could apply to the commissioner
for a waiver of the 180 day requirement.”
Neither state law nor the State Department
of Education has changed any law or policy
regarding the use of stockpiled days for snow.
Get Empowered, Connect
At Minority Affairs Conference
Mark your calendar and make plans to attend
the Johnella Martin/TEA Statewide Minority
Affairs Conference on March 23-24 at the
DoubleTree Hotel in Chattanooga.
Titled “Empowering and Connecting
Educators to Meet Challenges, Today and
Tomorrow,” the conference promises an exciting
lineup of speakers and workshops. Registration
deadline is March 12.
Panelists Mary Mancini, Tennessee Sen. Jim Kyle, Sen. Andy Berke and Rep. Joe Pitts.
How to Fix Our Economy
Experts suggest strategies, question
state use of incentives to business
It may not be obvious when one enters the state
legislature these days, but Tennessee has viable
options as it tries to get its fiscal house in order.
“Right here in the state legislature, when a bill
is introduced, it seems the first question that gets
asked is whether it’s good for business. The fair
approach is to ask whether it’s good for the people
of Tennessee,” said Mary Mancini of the Tennessee
Citizen Action organization during the Jobs and
the Economy Summit held at the end of last year in
Nashville.
Panelists and attendees agreed that education
funding is the foundation of economic prosperity in
Tennessee.
“Education is a primary economic driver for
the state and its localities,” said Matthew Murray,
professor at the University of Tennessee Center
for Business and Economic Research. “Education
also creates important spillover benefits, such as
increased longevity, lower infant mortality rates,
more volunteerism and higher voting rates.”
But current trends suggest that the focus in
Tennessee has been elsewhere. With Tennessee’s
unemployment rate hovering above the national
average at 9.6 percent, and per-capita income
growth of only 60 cents a year during the last 10
years (in inflation-adjusted figures), it is clear that
the economic engine needs adjusting. The gap
between the poorest and wealthiest Tennesseans
keeps growing wider. In fact, the state now ranks
fifth in the nation in terms of wealth disparity,
according to Michael Kahn, associate director of
finance and economics at NEA.
“Currently in Tennessee, tax structures are
out of sync with the economy, and school funding
is inadequate and inequitable. Schools lack the
capacity to do their jobs, but teachers are being
held accountable for student outcomes,” said Kahn.
“These trends undermine our future economic
prosperity.”
To solve the state’s fiscal problems, Kahn
suggested ensuring adequate and equitable
funding for public education through a system of
revenues that involves a level playing field for all
businesses, large and small. “Above all, if we want
to keep our economic edge in the knowledge-based
global economy, we must make investment in public
education our top priority,” he said.
To the obvious argument that there is no
money, Kahn questioned Tennessee’s current use of
the so-called economic development subsidies to
corporations. When the state of Tennessee offered
$577 million in subsidies to lure the Volkswagen
plant to Hamilton County, Kahn said the lost
revenue could have been spent more wisely. Under
the VW agreement, the city of Chattanooga and
Hamilton Co. will forego $200 million in property
tax collections for 30 years, and that’s just one
example of the myriad subsidies being doled out by
state and local officials to businesses every year.
At the same time, education funding in Tennessee
is now less than it was in 1970, and teacher salaries
remain largely unchanged over the last 20 years,
said Kahn.
Adding another item to the economic
prosperity wish list, Murray questioned the lack of
transparency in tax increment financing currently
used by localities for new economic development.
“TIF financing likely does more to reallocate
economic activity than create new activity,” he
said. “TIFs may also divert funds from schools to
financing of new development.”
While offering a solution, Kahn invoked the
name of billionaire investor Warren Buffett, the
champion of fair taxation among the wealthy.
“Just imagine the top one percent of income
earners in Tennessee with an annual income of
about $1.3 million paying at the same effective
rate as the bottom 20 percent,” he said. “It would
generate $2.2 billion—enough to wipe out the
adequacy gap and fix the structural deficit.”
Such measures may cause pro-business hawks
to cry foul, but Kahn insisted that they won’t hurt
small business because, according to IRS data, only
2 percent of small business owners make more than
$250,000 a year.
“As China doubles its investment in education,
no politician should be able to get away with saying
that they care about our state’s and country’s
future while shortchanging education,” said Jerry
Winters, TEA manager of government relations,
who attended the conference.
More than 96% of
TEA Dues Qualifies
For IRS Tax Deduction
The portion of TEA dues expended
for government relations activities for
2010/2011 is 3.82 percent.
TEA members can deduct 96.18 percent
of their dues for IRS income tax purposes.
TEA provides a pass-through procedure
whereby members contribute to TEA-FCPE
(Tennessee Education Association Fund for
Children and Public Education).
The amount of TEA-FCPE pass-through
for the current year is $4.41 per active
member and $2.21 per ESP staff member.
Members who do not desire to
participate may divert these funds to other
government relations activities — such as
promotion of the TEA legislative program
and lobbying — by completing and mailing
the accompanying form, postmarked no
later than April 10, 2012.
I request that the portion of my dues eligible
to be passed through to TEA-FCPE be used in
other TEA Government Relations activities.
Name (please print)
4 February 2012 For details, visit www.teateachers.org.
5
Address
City State ZIP
Social Security Number
Active Member
School System
Signature
Education Support Professional
Student Member
Mail to: Tennessee Education Association,
801 Second Avenue North, Nashville, TN
37201-1099. (This form must be postmarked or
received no later than April 10, 2012.)
www.teateachers.org