Introduces Bills to Cut State Aid, Grants, and Investments for Corporate Tax Dodgers
TRENTON — Senator Shirley Turner (D-Mercer, Hunterdon) has introduced a package of bills to prevent taxpayer funds from being used to subsidize companies that engage in corporate inversions, a tax-avoidance scheme where American businesses merge with foreign companies and shift their income overseas to avoid paying U.S. corporate tax rates. Senator Turner’s legislation would disqualify these businesses from receiving state subsidies and bar New Jersey’s pension fund from investing in them.
“The increasing trend of corporate inversions is not just a Washington problem; it’s a New Jersey problem, too,” said Senator Turner. “When multi-billion dollar corporations shift their income abroad to reduce their U.S. corporate tax rate, the state can no longer tax those corporate profits. Every other taxpayer must then pay more to make up for the lost revenue in order to maintain government services. It’s no wonder the state can’t meet its financial obligations. In New Jersey, we are exacerbating the problem by giving taxpayer-funded handouts to support these corporate tax dodgers. We should not reward corporations that have renounced their U.S. citizenship to avoid paying their fair share of taxes. It’s unpatriotic.”
A study by U.S. PIRG found that states lost more than $39 billion in tax revenue in 2011 and that New Jersey was among the top five losers.
“We need to discourage this trend now,” said Senator Turner. “These companies are taking more of our tax dollars and not giving anything back. It’s a practice that is hurting our economy, straining the middle class and other businesses that recognize that paying their fair share is a civic responsibility.”
Under Senator Turner’s legislation, inverted companies would be ineligible for state economic development grants or other types of financial aid, including reimbursement of taxpayer-subsidized programs, such as Medicaid.
A number of inverted corporations have already benefitted from New Jersey’s business incentive programs, including Tyco International, Inc., which received a $15.4 million Business Employment Incentive Program (BEIP) grant in 2003. Pfizer, which has pursued tax inversion transactions, has received a total of $48.28 million in BEIP and other incentives. Dey Pharma, L.P., Mylan Inc. and Affiliates received a $1.09 million BEIP grant in 2009 and Abbott Laboratories has also benefitted.
Last month, Senator Turner introduced S-2361 to bar these companies from receiving state contracts.
Another proposal introduced by Turner would prohibit the state’s pension board from investing in companies that have exploited the tax loophole. New Jersey is among the state government pension funds with investments in companies that have taken advantage of the corporate inversion loophole.
New Jersey ranks sixth among public pension funds investing in corporate inverter AbbiVie, holding more than 1.5 million shares of the company’s common stock valued at $81.9 million. New Jersey also ranks tenth among public pensions holding shares in Walgreen Co. — 450,000 shares valued at $30.8 million. Walgreen Co. recently pursued a tax inversion deal with British retailer Alliance Boots.
Senator Turner also introduced joint resolutions calling on Washington lawmakers and the President to enact the “Stop Corporate Inversions Act of 2014” and to put a law in place to prohibit federal contracts for American companies that engage in inversion practices.
“Congress needs to act, and they need to act now, to put an end to this corporate desertion,” Senator Turner said. “These are highly-profitable companies that have benefited mightily from domestic business opportunities created by everything our tax dollars support, including an educated workforce, the transportation infrastructure, etc. Basically, these corporations are boosting their profits by avoiding taxes and paying less than the rest of us for all the same services and conveniences.”
According to the congressional Joint Committee on Taxation, the United States could lose $20 billion in taxes over the next 10 years due to inversions.
Turner has long been an advocate for ensuring that state government protects taxpayer interests and New Jersey jobs. Her legislation, signed into law in 2005, requires all services under state contracts or subcontracts to be performed in the United States.