Last month, Gov. LePage and leaders of the Maine Legislature received a letter from Jean-Louis Wolzfeld, ambassador of the Grand Duchy of Luxembourg. What prompted a distinguished individual from the European microstate to reach out to the elected leadership of our state? Simple: He’s insisting on being allowed to continue helping large corporations hide their money from us.
At issue is a bill submitted by Democratic Bangor Rep. Adam Goode, chair of the Legislature’s Taxation Committee, that would close a loophole allowing multinational corporations to use offshore tax havens like the Cayman Islands (or Luxembourg) to avoid paying their fair share of taxes in Maine.
The legislation, modeled on laws already in effect in Montana and Oregon, would require corporations filing tax returns in Maine to report and pay a portion of taxes on income that they have stashed in 38 known tax havens across the globe.
The tax haven bill, which is estimated to save the state $5 million a year in recovered taxes, passed with mostly party-line votes this week in the House and Senate, but is expected to soon be vetoed by Gov. LePage.
It’s a shame that this has become a partisan issue and that the governor will likely step in to protect these accounting tricks. If there’s one piece of tax policy that people of all ideological persuasions should be able to agree on, it’s that large corporations operating and making profits in the United States shouldn’t be able to avoid their tax responsibilities by hiding their profits overseas.
In fact, recent polls by Hart Research on behalf of Americans for Tax Fairness found that it’s by far the most popular proposed change to the nation’s taxation system, with the support of around 80 percent of voters.
The ambassador claims in his letter that the problem doesn’t actually exist, that Luxembourg isn’t actually a tax haven and that taxation and banking laws there are as strict as anywhere else.
A taste for cheese?
I guess American brands like Amazon, Skype, DuPont, Apple and PayPal have all established corporate headquarters in his tiny country not for tax reasons, but because of their CEOs’ collective and completely coincidental love of fine cheese and Romanesque architecture.
Rep. Mike Carey, D-Lewiston, did an excellent job of tearing apart Wolzfeld’s claims on the floor of the House this week by simply reading from Luxembourg’s own promotional websites, where they try to entice foreign companies to relocate their profits to the Duchy by touting their “mitigation of taxation on foreign-source income” and the creativity and secrecy of their banks.
One loophole they promote in particular is a “special exemption for income from IP rights,” which allows American companies to avoid taxes by, for instance, selling a patent to a Luxembourg subsidiary for a nominal fee, then charging themselves licensing fees for its use in their products. They effectively reduce their U.S. taxable income and stash their profits in Luxembourg.
The nation of Luxembourg hasn’t been a traditional powerhouse in Maine politics, so why does it have the support of Gov. LePage and nearly every Republican legislator in turning down $5 million a year and leaving this loophole open? According to Republican Rep. Gary Knight of Livermore Falls, it’s because enforcing fair taxation laws is just too complicated.
“We just don’t have the skill set here in the Maine Revenue Service to go after these folks,” he told the Lewiston Sun Journal.
Knight’s assessment is at odds with the experience of the other states that have already acted to disallow tax havens.
“Administratively, there have been no noticeable costs or challenges associated with the implementation or enforcement of the law,” wrote Dan Bucks, Montana’s director of revenue, in testimony he submitted last year. “I received no complaints from corporate taxpayers about the law, its implementation and or its impact.”
GOP listening to lobbyists
So not only is Maine being bullied by Luxembourg on this issue, we’re being shown up by Montana.
The real reason Republicans are likely opposing the closure of this loophole can be found not in the letter from Wolzfeld but in another letter that also arrived in their in-boxes last month, this one from a lobbying group for some of the world’s largest pharmaceutical, technology, telecommunications, oil and insurance companies (many of whom also happen to be big donors to the Republican Party) arguing against the bill.
Next time you hear about budget shortfall, “tough decisions” and cuts to health care and education, remember the day our state gave back millions of dollars to big corporations and their offshore accountants. How does that cheese taste?
Mike Tipping is a political junkie who works for the Maine People’s Alliance. He can be contacted at: