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