Berkshire edge editorials11/22/2023 Setting the business media straight, a group of top economists and law professors responded with a letter to Minnesota's tax conference committee, detailing their support for worldwide combined reporting and refuting objections: Even the Wall Street Journal joined in, targeting civil servants with a condescending critique (later proved erroneous) of a revenue estimate. They threw it all against the wall like day-old spaghetti to see what stuck and - surprise! - the business media caught every noodle. The wonks tried to bore you into surrender with complaints of complexity, calculations and cries of "administrative burden!" The scaremongers foretold trade wars and endless litigation. Minnesota was on track to adopt this easy fix until my old friends got up to their old tricks, trying to kill sound tax policy with a one-two punch of tedium and threats. With "worldwide combined reporting," the state taxes it fair and square.įor precisely that reason, many leading experts love worldwide combined reporting while tax avoiders - like my former colleagues who make a killing as enablers - absolutely hate it. Move your Minnesota profits around your pockets as much as you like, smart guy. Just ash-can the water's edge election and replace it with "worldwide combined reporting." That rule reflects reality: It treats those two pockets as what they are - parts of a single pair of pants. Worse, hardworking Minnesota families pick up the tab through higher taxes and lost public services.Įnough bad news here's the good: It's easy to shut this tax avoidance down. By moving that cash with some slick restructuring - the kind of miserable trickery I was really good at - you cheated Minnesota out of millions in tax revenue. Your pants are a multinational corporation, that wad of cash is billions in profits from sales to Minnesota customers, and your right pocket is a subsidiary in an offshore tax haven. The money is still yours it's still in your pants but now it escapes taxation. But Minnesota can't touch your right pocket, so you move that cash over. The left pocket's stuffed with a wad of cash that the state is entitled to tax. Imagine it this way: You're wearing your favorite pair of jeans. Then as now, the culprit is the "water's edge election" - a nasty little accounting rule that allows big corporate groups to shift their Minnesota-taxable profits into offshore tax havens where they escape taxation entirely. Minnesota could strike a major victory by passing a tax bill that includes "worldwide combined reporting." Allow me to explain:ĭuring my decades as a professional enabler of my clients' tax-dodging, avoiding Minnesota corporate income tax was easier than falling off a log after a long day of portaging in the BWCA. Right now, the Minnesota Legislature is deadlocked in a battle between tax cheats and tax justice. Now I work to shift the balance of power toward inclusive prosperity. I was executive tax counsel at a Fortune 10 multinational corporation and leader of a 600-person "state tax minimization" group at a Big 4 accounting firm. Opinion editor's note : Star Tribune Opinion publishes a mix of national and local commentaries online and in print each day.
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