FOR IMMEDIATE RELEASE
February 20, 2025
Contact: Kirstin Snow at PPC (snow@pennpolicy.org) or Jon Whiten at ITEP (jon@itep.org)
National Report: PA Could Raise $1.537 BILLION Per Year with One Policy Change Targeting Corporate Tax Avoidance
Worldwide combined reporting negates the tax benefits of shifting corporate income offshore
Harrisburg, PA—On Wednesday, February 19, 11AM on Zoom, the Pennsylvania Policy Center (PPC), national think tanks Center on Budget and Policy Priorities (CBPP) and Institute on Taxation and Economic Policy (ITEP), and Representative Elizabeth Fiedler unveiled and discussed a new report on worldwide combined reporting and the state budget. Video of the event can be found here.
Public polling has consistently shown for decades that most people believe big multinational corporations are paying too little in taxes. Closing the loopholes these corporations use to avoid taxes is one of the most effective — and popular — solutions to this problem. Voters want to see lawmakers crack down on corporate tax avoidance, and PA lawmakers have a readymade solution to do just that: worldwide combined reporting.
SPEAKERS:
- Representative Elizabeth Fiedler
- Don Griswold, Senior Research Fellow, CBPP
- Carl Davis, Research Director, ITEP
- Marc Stier, Executive Director, PPC
Worldwide combined reporting eliminates the tax savings from shifting corporate income offshore by treating a corporation, including all its subsidiaries within the U.S. and in foreign countries, as one entity for tax purposes. This policy would raise $1.537 BILLION per year if in effect in PA, according to a new in-depth analysis by the Institute on Taxation and Economic Policy.
At the release event, Marc Stier said, “At a time when Pennsylvania is likely to spend 4 billion more in the next fiscal year than it receives in revenue, worldwide combined reporting is a no-brainer. It will raise $1.5 billion in revenue paid entirely by corporations that are not based in Philadelphia but operate here. Those corporations take advantage of roads paid for by the taxpayers of our state and workers educated by the same taxpayers. But they pay nothing for them. Worldwide combined reporting will not discourage investment or job creation in our state while raising substantial new revenues.”
Other key findings:
- Nationwide, universal adoption of mandatory worldwide combined reporting would boost state corporate income tax revenues by roughly 14 percent, or $18.7 billion, per year.
- The revenue effects would vary across states, with 38 states and D.C. seeing revenue increases totaling $19.1 billion per year and five states seeing revenue declines totaling $400 million per year.
- PA is among those with the most to gain from this policy: the $1.537 billion raised per year is the third-highest amount of all states.
“Worldwide combined reporting would ensure that companies pay tax based on their profits and business fundamentals, not the level of creativity their accountants bring to their tax returns,” said Carl Davis, research director at ITEP and an author of the report. “Any lawmaker who is sick and tired of U.S. companies pretending they earn the bulk of their profits in Ireland and the Cayman Islands should be taking a hard look at worldwide combined reporting right now.”
Don Griswold, fellow, CBPP, said, “Pennsylvania tax law is so porous that, when I was leading a 600-person State Tax Minimization group at KPMG, we called Pennsylvania ‘the Rip Van Winkle of state tax policy’—asleep in the hills for years as we drove a revolution that industrialized corporate tax avoidance in the Commonwealth.”
He added, “Pennsylvania tax law discriminates against its own small business community with a tax system that contains a huge loophole that’s rigged in favor of the most aggressive global corporate giants run by the world’s richest humans. The profit-shifting loophole costs Pennsylvanians hundreds of millions in tax collections every year, diverting funds away from projects for the common good and into the pockets of these aggressive corporations and the greedy multi-billionaires that own them.”
In all, 28 states plus D.C. already require combined reporting, but the combined report only includes subsidiaries within the U.S. Extending these laws to include foreign entities is a commonsense way to make a state’s corporate tax code fairer by cracking down on tax avoidance.
That’s one reason worldwide combined reporting has received a growing amount of attention in the states in the past few years. Legislative chambers in Maryland and Minnesota approved the policy in 2024 and 2023, respectively, and bills have been introduced in at least eight other states across the country. Lawmakers in eight states have introduced, or plan to introduce, legislation this year as well.
And in fact, as ITEP pointed out in 2023, 14 states and D.C. either allow, or require, companies to file returns that include at least some profits booked in foreign countries, while 10 states and D.C. allow for worldwide combined reporting on an elective basis. In other words, requiring worldwide combined reporting would not be a radical change for multinational corporations that are already having to do this accounting work internally.
While our analysis focuses only on the revenue potential of worldwide combined reporting, there are many other compelling reasons for lawmakers to enact this policy. In addition to raising revenue in most states, worldwide combined reporting would help level the playing field between small in-state businesses and large multinationals and could be enforced far more effectively than the current patchwork of laws and litigation designed to curb aggressive corporate tax avoidance.
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