In his State of the State address, Vermont Governor James Douglas proposed closing a tax loophole that gives national chains an advantage over local businesses. The loophole allows multi-state corporations to shift income made in the state to subsidiaries in low- or no-tax states like Delaware and Nevada, thereby evading Vermont corporate income taxes.
As we reported in the July 2003 issue of this bulletin, similar loopholes exist in twenty-two states and the District of Columbia. Small businesses with all of their operations in one state cannot take advantage of these loopholes and must instead pay state income tax on all of their earnings.
“Huge companies pay only a minimum $250 tax while our homegrown Vermont businesses, particularly our small businesses, pick up the rest of the tab,” Douglas said in his speech.
The next day, on Vermont Public Radio, the governor gave an example of three multi-state companies (he did not name them) that had $6 billion in combined revenue in the state last year, but paid only $750 in corporate income taxes. He then cited three local businesses with combined revenue of $700 million that paid $7 million in corporate income tax last year.
Governor Douglas has proposed closing the loophole and using the additional revenue to fund an across-the-board cut in Vermont’s corporate tax rates.