Worldwide Post Mortem

When worldwide combined reporting was suddenly pulled from the Senate tax Bill, a wag with no stake in this issue whatsoever emailed me with the message “Down Goes Frazier.”   It was a highly apropos remark because the whole debate has very much resembled a heavyweight boxing match.  You had the progressive think tanks on one side armed with their tax experts versus multinational corporations armed with their tax experts trading blows charging distortion, exaggeration, misrepresentation and spin. 

So it’s natural to look at the knockout and wonder just what happened behind the scenes.   The progressive Minnesota Reformer took up the task and offers some insights. 

Though her announcement came days after intense pushback from corporations — which claimed worldwide combined reporting would unleash retribution from other countries — Rest told the Reformer her decision to walk back the measure wasn’t to appease the business lobby.

Asked if corporate influence played a role, Rest called the assertion “bull—.”

“That’s not true. That’s so far from the way in which my mind works,” Rest said.

Rest, who was first elected to the Legislature in 1984, said after speaking with Senate colleagues on the taxes conference committee, she decided worldwide combined reporting had too many uncertainties, would not be a reliable source of revenue and would likely result in companies suing Minnesota.

A lot people will likely read this and chalk the decision up to a politician in a seat of influence being hornswoggled by business lobbies and their talking points.  For that reason it would have been worthwhile to also note that the Senator is a retired CPA, holds a Masters in Business Taxation from the University of Minnesota and serves on the National Conference of State Legislatures’ Executive Committee Task Force on State and Local Taxation and the Executive Committee of the Streamlined Sales Tax Governing Board.   With all due respect to other members, it is probably not an exaggeration to say she has a deeper understanding of, experience in, and appreciation for the exceedingly complex world of tax administration and compliance than the rest of the House and Senate tax committee membership combined.   It also explains why she bluntly took offense at the idea of appeasement or being duped.

Then there is this nugget, and kudos to the Reformer for reporting it:

A senior administration source said they conveyed concerns to Rest about implementation.

Note the subject and predicate.  It’s not the Senator telling the reporter the Administration had concerns, it’s a senior administration official saying they conveyed concerns about implementation to the Senator.  Which is interesting because lawmakers were told on the Senate floor when the omnibus bill was being debated that this is something “far more simple than is being construed,” and “the Department of Revenue has assured us this is something they could administer quite handily and easily.”

Whatever chaos this introduces into the end of session, it is incredibly refreshing to see a politician, under undoubtedly considerable pressure, make a call based on weighing matters of good policy rather than politics.   Saving the state revenue system from dealing with a potentially considerable mess is a bonus.

In full disclosure, Senator Rest is a member of the MCFE.