One of the problems states have in collecting enough taxes to do what needs to be done is the need to compete for job creating businesses to locate in their state by giving tax and other concessions to those businesses. A company like Amazon that wants to create a new headquarters has various localities competing to get that headquarters to be located in their jurisdiction. If states don’t play the game, then businesses go elsewhere. How can the government at several levels cooperate to help free states and localities from this corporate blackmail?
One way to halt or lessen the race to the bottom is to impose a federal tax on the corporations for the imputed income that the concessions represent.
WikiPedia has several things to say about the concept of imputed income.
Imputed income is the accession to wealth that can be attributed, or imputed, to a person when they avoid paying for services by providing the services to themselves, or when the person avoids paying rent for durable goods by owning the durable goods, as in the case of imputed rent.
As for taxing imputed income, WikiPedia further explains:
Many countries, such as the United States, tax imputed income only in certain limited situations. Imputed income is sometimes difficult to measure, and tax policies regarding imputed income can have political consequences. For taxpayers, not taxing imputed income creates a tax incentive in favor of owning over renting, and in favor of self-service over hiring. For the economy, not taxing imputed income directs economic activity away from activities associated with extreme and severe division of labor.
If the federal government decided to collect taxes on the imputed income from tax breaks that localities give to coporations, then this could significantly lessen the value of these tax breaks to corporations. They would have less incentive to play one locality against another for free benefits. One could go beyond the tax breaks to include the building of infrastructure specifically for one corporation (or group of corporations).
Of course, if the federal government went too far in this direction, it would create incentives for corporations to relocate their facilities in other countries. That is why there needs to be cooperation among national governments on some tax policies. There were negotiations going on among countries to come to just such agreements before George W. Bush came to office. He put a stop to the participation of the USA in such talks.
Imagine if trade negotiations included agreements on tax policies as well as on policies to protect the profits of corporations.
Here is a Google search on international tax negotiations so you can do further research on this idea.
I also found the paper Piercing the Veil of Secrecy: Securing Effective Exchange of Information to Remedy the Harmful Effects of Tax Havens. The first page of the paper is numbered 293. Starting on page numbered 313, I found the following quote:
Although many different organizations have introduced projects to combat the destructive effects of tax havens, there is still no single comprehensive regulation aimed at controlling tax havens or the capital flows that go through them. Among the various international initiatives, there is a clear lack of accord on the degree of harm created by tax havens and on the best method to deal with the adverse economic effects they cause. Arguably, the most successful multinational initiative today has been the work of the OECD, and its work to develop a model tax agreement.
One of the references that was in the above quote on WikiPedia seemd to come from the video Tax Havens: The Hidden Hand in the Financial Crisis.
The financial crisis seems as if it emerged from nowhere and struck as hard and fast as lightning. How did so many financial institutions crumble with so little warning? There are many reasons, but one that has not been given much attention is how tax havens helped enable the mess â and how several of the big companies that have received billions of bailout dollars were also the most active in the shady world of offshore finance.
I couldn’t find a reference to George W. Bush’s stopping international tax negotiations, but I did find a paper, When International Tax Agreements Fail at Home: A U.S. Example, with the footnote below that confirms that international tax treaties were established practice.
The two levels may typically be sequential as a formal matter, with states negotiating their agreement, which then would be ratified through internal domestic processes. Given established treaty practice (including the U.S. Model Tax treaty and the OECD Model Tax treaty), little risk generally would be anticipated at the second (i.e., domestic) level. It should be noted, though, that in 1995 Senators Bob Dole and Jesse Helms blocked ratification of tax treaties until President Clinton compromised on another unrelated bill. This situation, which differed from the current U.S. treaty blockage in that there was no underlying objection to the tax treaties themselves ,emerged after the Senate failed to vote on the State Department Reorganization and Authorization Act. As retaliation, Senate Majority Leader Dole coordinated with Senator Helms, the Chair of the Senate Foreign Relations Committee, to block all tax treaties until the White House acquiesced. A month later, Senator Helms released seven tax treaties as a show of “good faith,” though he continued to delay meetings of the Senate Foreign Relations Committee, effectively holding up all foreign policy legislation requiring Senate approval.
Don’t forget the Commerce Clause in the U.S. Constitution.
The Commerce Clause refers to Article 1, Section 8, Clause 3 of the U.S. Constitution, which gives Congress the power “to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.”