July 1st was the date that much of the Minnesota’s 2014-15 tax plan began to be enacted. This includes the new tobacco taxes, the corporate loophole closings, and, of course, the increased income tax on the top 2%. As we pass this milestone, expect critics to make their complaints known. At this point their threats are pretty familiar: taxes force the rich to move out of state and take their jobs with them.
Nowhere was this refrain more tired than in the debate over corporate taxes. For example, this year, the Legislature and Governor faced relentless lobbying from no fewer than four business associations that wanted to preserve a jumbo-sized tax loophole known as the Foreign Royalty Subtraction. This loophole, in essence, created an in-state tax haven for intellectual property. The theory was: if Minnesota shelters certain royalty payments for intellectual property, businesses will create more jobs, and not just any jobs, but high-paying, high-tech jobs in research and development.
As it turns out, this tired theory of taxes was no truer here than it has been in Ireland, Bermuda, or Vanuatu. During the final days of the recent Conference Committee on Taxes, non-partisan staff from the Department of Revenue explained that only three of the top twenty corporations that claimed the Foreign Royalty Subtraction actually had R & D operations in Minnesota. … Continue reading »