Fighting Overseas Tax Havens to Help Colorado's Schools

It's gotten to the point where everyone  in the Colorado wants to tax the richest people and biggest corporations, who hide their money to avoid paying taxes, and then use the money on education. Okay, not everyone but, seriously, most of us.

But how to do it in a fashion that's got a prayer of untying the knot of legal restrictions and divided government?

Democrats in the state legislature may have hit on a way to do all of this.

Standing under the gold-domed Capitol on the eve of Tax Day, state lawmakers unveiled a proposed law that would stop Colorado corporations from hiding profits in overseas tax havens, like the Cayman Islands.

Closing this tax loophole would generate a tidy $150 million in tax revenue annually that would go to education in Colorado.

"There are some corporations that don't pay their taxes, like the rest of us do," said Rep. Mike Foote yesterday, as you can see in a Denver Business Journal video here.

They do get a chance to use our roads, to take advantage of educated folks to work in their businesses, courts for dispute resolution and so forth. But they don't pay for the use. It's not fair to the state of Colorado. It's not fair to the rest of us. And this bill will address that lack of fairness by closing loopholes that some corporations use by funneling their money offshore in order not to have to pay taxes on it.

The bill, sponsored by Foote and Rep. Brittany Pettersen of Lakewood, would not only have to clear the divided State legislature but also be approved by voters in November. So it has a long way to go.

But similar bills became law in Montana and Oregon, picking up bipartisan support along the way, according to the bill's sponsors.

So you'd think a bill like this would have a chance here in Colorado, where the public is overwhelmingly in favor of such measures, according to a poll sent to reporters yesterday by ProgressNow Colorado.

"The data is clear: Coloradans are keenly aware of the loopholes big corporations exploit to avoid paying taxes, and they are tired of the double standard," said ProgressNow Director Amy Runyon-Harms in a statement. "Legislation to require corporations to report profits diverted to overseas tax havens is a political winner as well as the right thing to do. Every taxpayer deserves to know that big corporations are paying their fair share for the basic functions of government we all rely on."

The Denver Post's Joey Bunch reported yesterday that the legislation is opposed by The Colorado Association of Commerce and Industry:

We understand the intent to eliminate the shifting of income to tax havens to avoid Colorado taxes," said Loren Furman, CACI's senior vice president for state and federal relations. "But, there are many instances where legitimate business is conducted in these countries, and that income may not have been subject to Colorado tax.

But it's hard to see why this is a concern, if you look at how the bill would work: Ed Sealover at the Denver Business Journal explained this:

Colorado law currently requires companies doing business here to pay taxes on the portion of national income that the corporation generates in this state. But that equation gets more complicated with companies that off-shore some of their business by setting up subsidiaries in tax-friendly countries, transferring intellectual properties to those subsidiaries and have the subsidiaries sell that property -- such as, say, a logo -- back to the main corporation for a cost that sometimes can be as large as the overall profit that corporation makes in the U.S., Foote said.

So will people believe The Colorado Association of Commerce and Industry? Or will they believe Pettersen when she says, "Big corporations shouldn't leave the rest of us on the hook because they know how to game the system and avoid paying their fair share."