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.