More than ever, deficit-plagued states need to find new revenue sources to balance their budgets while simultaneously fostering an economic climate that is conducive to job creation. This week, the New York State Senate Select Committee on Business and Tax Reform sought to move forward on both fronts, and held a hearing to discuss ways in which the state's corporate tax base could be expanded by eliminating corporate tax incentives that don't achieve their stated economic development goals.

The Institute on Taxation and Economic Policy (ITEP) submitted testimony discussing the contradictory and potentially harmful incentives created by several corporate giveaways. One was enacted by the state less than five years ago (the "single sales factor" for manufacturing companies). Another, the "cancellation of debt income" or "CODI," was foisted on the states by this year's stimulus bill. The CODI provision, which created a new break for corporations in the federal tax code, was ranked by CTJ as one of the worst six provisions in the stimulus bill passed out of the Senate and unfortunately it was included in the final law that was enacted. Because most state corporate income taxes are linked to the federal corporate income tax, this new giveaway reduces state revenue as well as federal revenue.

The Fiscal Policy Institute also presented testimony on sensible loophole-closing options. The Center on Budget and Policy Priorities released a new paper this week that explains the CODI provisions and identifies the many states that could raise additional revenues by decoupling from this provision.

Thank you for visiting Tax Justice Blog. CTJ and ITEP staff will soon retire this domain. But ITEP staff are still blogging! You can find the same level of insight and analysis and select Tax Justice Blog archives at our new blog, http://www.justtaxesblog.org/

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