The Erosion of the States' Tax Base—A Whopper of a Problem? An Examination of Possible Solutions to Corporate Inversions

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

In the past 10 years, there has been a surge in corporate inversions, with 47 companies engaging in these transactions between 2004 and 2014. Estimates show that legislation to tighten rules to limit inversions could save taxpayers nearly $20 billion over 10 years. However, inversion transactions are only the tip of the iceberg, as corporations use a variety of mechanisms to shift income abroad, leaving the states and the federal government with a dwindling tax base. This article explores how states are addressing income-shifting strategies used by multinational corporations and examines the effectiveness of employing these methods to combat the effects of corporate inversions as well.