Exploring NC's gas tax conundrum

It's not as cut-and-dried as you might think:

The gas tax is a major revenue source for transportation projects such as repairing bridges, repaving roadways, and building highways. The failure of the current gas tax (and other transportation funding sources) to support these important public services means that backlogs for both maintenance and repairs projects persist. The state Department of Transportation estimates that North Carolina faces a $60 billion shortfall for transportation improvements through 2040, and that the state needs to come up with $32 billion just to keep the status quo.

I am genuinely conflicted on this issue, and it's doubtful I will be able to find a comfortable position on either side. I also find little comfort in the fact that infrastructure is crumbling all across the country, and not just in North Carolina. In response to a comment I made on Facebook about the regressive nature of the gas tax, Mark Turner made a good point:

Our infrastructure is crumbling. A high gas tax helps pay for the largest state-maintained highway system in the country. Without this high tax, rural areas would suffer because they could not afford their roads. The gas tax spreads this burden around. I maintain that cutting the gas tax actually hurts poor people.

I would only modify that statement by saying, "Not taking care of our infrastructure actually hurts poor people." See the difference? The gas tax is only one of many options for paying for road maintenance. It makes sense on paper, because it is based on usage. The more gas you buy, the more driving you're doing. But it isn't enough, and it's never been enough, which is why we're looking at such a huge shortfall.

Make no mistake, huge profits are being generated by a portion of those who use our infrastructure. And I'm not talking about the single mother who drives 35 miles each way to a job that pays $32,000 per year. I'm also not talking about the trucking companies that move goods along the highways, because even the most efficient are struggling to stay out of the red. However, I am talking about these folks:

Tax loopholes encouraged more than 70 percent of Fortune 500 companies to maintain subsidiaries in offshore tax havens as of 2013, according to “Offshore Shell Games,” released today by the U.S. PIRG Education Fund and Citizens For Tax Justice. Collectively, the companies reported booking nearly $2 trillion offshore for tax purposes, with just 30 companies accounting for 62 percent of the total, or $1.2 trillion.

At least 362 Fortune 500 companies operate subsidiaries in tax haven jurisdictions, as of 2013. All told, these companies maintain at least 7,827 tax haven subsidiaries. The 30 companies with the most money booked offshore for tax purposes collectively operate 1,357 tax haven subsidiaries.

Only 55 companies disclose the amount they would expect to pay in U.S. taxes if they didn’t report profits offshore for tax purposes. All told, these 55 companies would collectively owe $147.5 billion in additional federal taxes, equal to the entire state budgets of California, Virginia, and Indiana combined.

Nike: The sneaker giant reports having $6.7 billion booked offshore, on which it would otherwise owe $2.2 billion in U.S. taxes. That means they pay a mere 2.2 percent tax rate on those offshore profits, suggesting nearly all of the money is held by subsidiaries in tax havens. Nike does this in part by licensing the trademarks for some of its products to 12 subsidiaries in Bermuda to which it must pay royalties. Its Bermuda subsidiaries actually bear the names of their products like “Air Max Limited” and “Nike Flight.”

Pfizer, the world’s largest drug maker, operates 128 subsidiaries in tax havens and currently books $69 billion in profits offshore, the third highest among the Fortune 500. Pfizer recently attempted the acquisition of a smaller foreign competitor so it could reincorporate on paper as a “foreign company.” Pulling this off would have allowed the company to use its supposedly offshore profits in the U.S. tax-free.

Citigroup reported operating 427 tax haven subsidiaries in 2008 but disclosed only 21 in 2013. Over that time period, Citigroup more than doubled the amount of cash it reported holding offshore. The company currently pays an 8.3 percent tax rate offshore, implying that most of those profits have been booked to low or no tax jurisdictions.

The shoes you wear, the prescription drugs you take, and the interest you pay on the credit card you use to buy those and other things, are all contributing to the draining of capital that should be yielding revenues to support our roads, bridges, schools, etc. And we're arguing about a few pennies on the gas tax.



Gas tax