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Montana Viewpoint

JUST THE FACTS

Decision makers need accurate information on corporate taxes.

February 20, 2006

As you may know, I’m suing the Montana Department of Revenue for release of certain information found on national and multi-national corporations’ Montana income tax records. I’ve got a couple of reasons for doing this; one as a citizen, one as a legislator.

As a citizen of Montana I—and every other Montanan—enjoy the provision of the Montana Constitution that gives us a right to examine public documents. I believe that includes corporate income tax records because of a 2003 Montana Supreme Court ruling holding that in Montana, corporations do not have the Constitutional right of privacy that Montana citizens enjoy.

As a legislator, I’m hired by my constituents to set public policy, and setting tax policy is part of that job. I’ve heard some people argue that taxes don’t affect big business at all while others say tax cuts stimulate the economy, and that tax increases “chill” the economy.

Well, maybe so, but if it does or doesn’t, how will we know? I’ve heard a bazillion claims that any up-tick in tax revenue in Montana is the result of previous tax cuts. I’m prepared to concede that, if someone can show me the proof, and if we had access to corporate income tax records someone could show me—or not.

Some folks think I want access to these records out of pure cussedness. I get asked, “Well, what good will seeing the records do? What will you use it for?” I guess I am just one of those pesky guys who like to see information so I can make a good decision. It’s like looking at the weight slip on cattle you sell.

But it’s a fair question, and deserves an answer, so here it is.

The issue began to get my interest back when Enron blew up in 2001. It turned out they were padding their books to gull their investors, and I began to wonder if they were telling the same story to the IRS and had to pay tax on the phony profit.

So I began to look into honesty in corporate income tax reporting by getting some data from the Montana Department of Revenue (MDOR) on 491 companies doing business in Montana. These were companies that had 2002 sales in Montana from $5 to $795 million. I did not ask for the companies’ names.

My interest accelerated when I found out that 40% of these national and international companies had paid less than $500 in income tax. It went into overdrive when I found out that 49—that’s ten percent—of the companies hadn’t paid any more than that for five years running.

But when I went back to the MDOR for more information I was told I couldn’t have it and couldn’t get it because it was against the law. I took issue with their answer, and lo and behold we have wound up in front of the Montana Supreme Court to hash it out.

Legislators make decisions that affect people’s lives. In decisions that important, you’d better have the facts before you decide how to vote.

Unhappily, legislative decision making is based more on faith than fact. In the argument about the effects of taxes on big business some say tax what the market will bear while the others say don’t tax them at all. Both claim their viewpoint is better for America, and both sides look at identical data and draw opposite conclusions from them.

This is an opinion in search of a rationale. If everything you see substantiates what you want to believe, then what might be called critical thinking ain’t happening. For instance, there are several ways those 49 companies may have had a low tax liability all those 5 years.

They may be just starting business in Montana; they may have had large and legal deductions from their income; they may be operating under new ownership or under a new name…or they may be cheating us blind.

Which is it? Quite frankly, the answer is what you want it to be because without looking at the data there is no way of telling.

But knowing why is important to every Montanan because our tax policy may be killing that golden egg laying goose, just right, or incapable of catching tax cheats. On the one hand you don’t want to hurt the economy, on the other you want to protect honest Montana taxpayers by making sure the Wall Street crowd pays us what it owes us.

I have just as many prejudices about how taxes affect business as the next guy. Often wrong, but never in doubt, as they say. But I am willing to be convinced otherwise because the most important thing is to do what’s best for Montana, and to do that, you have to have the facts.

Jim Elliott
Phone: 406-444-1556
Mail: State Senate Helena, MT 59620

jim@jimelliott.org