New legislation is being introduced to the Legislature by Rep. Adam Goode, D-Bangor. LD 1120, An Act To Improve Maines Tax Laws, would amend the law to reduce the use of so-called offshore tax havens, which cut revenue to the state. The bill has made it to the taxation committee but has ended in a divided report. There is the possibility it may go to the floor for a vote soon.
As it stands currently, multinational corporations can take advantage of a tax loophole called waters edge election, which, in simple terms, allows the corporation to apportion out its tax burden by allocating or shifting its profits to a location with a lesser tax rate.
Lets say Corporation XYZ, which incorporated in Maine, has offices in 10 different countries and is conducting business there accordingly. Corporation XYZ has made a majority of its profit here in the state of Maine. When it comes time to file taxes, the corporation would show that it shifted its profits gained in Maine to one of its offices in a country that provides little or no taxes, thereby lessening the tax burden to the corporation.
I own a small business, and I pay income taxes. As a business person, I understand wanting to maximize my profits, by looking for things that are affecting the bottom line. I am not an international corporation, but I have made international sales. I would love to be able to show that I made profits in a place that I didnt have to pay income tax, but I would be lying.
I live in Maine. My business is in Maine. Therefore, I pay my taxes in Maine. That is fair. If you are conducting business and netting a profit in this state, you should pay taxes in this state. LD 1120 is intended to do just that.
However, one potential concern with this bill is whether it will provide the anticipated $5 million to $7 million in revenue. Or will it lead to corporations leaving Maine for other states with a less stringent tax code?
This may not be a big concern, according to reports. Montana reported an increase in business and filings in the state in the years after its implementation. Oregon is estimated to gain just over $18 million this year.
It appears fears that closing the tax loophole are overblown. Maine should claim what rightfully belongs to the state by altering the existing code to better define tax havens and close the proverbial door to the unabated looting of our state treasury. The additional revenues gained from this restructuring and redefining would help offset the need currently seen in our state budget.
Whether or not we restructure or alter our tax code, our state government needs to take a look at all successful business and learn something. We must live within our means, which would be done by balancing the budget and sticking to it. If I continually ran a deficit like our federal government, I would eventually end up bankrupt or in jail. Now that is not fair. But in the eyes of fairness, we should level the playing field so that larger multinational corporations pay their fair share, as smaller corporations and businesses do.
My plea for all Mainers is to become more knowledgeable about the legislative process and get involved. In regards to bill LD 1120, perhaps by contacting your legislator we can get this bill noticed and up for a vote, so it can be discussed and talked about. Increasing the states revenue stream could mean the difference between programs being saved or cut.
From a small-business owner: Why Maine shouldnt let corporations hide profits offshore