WASHINGTON – U.S. Sen. Ron Wyden (D-Ore.) today introduced legislation that would disqualify private prisons from receiving tax subsidies unavailable to other corporations.
Wyden’s bill is a companion to legislation introduced in the House by Rep. Gregory W. Meeks (D-NY), a senior member of the House Financial Services Committee. Both bills deal with private prisons’ ability to qualify as Real Estate Investment Trusts (REITs) — corporate entities that do not pay tax and whose shareholders only pay tax on distributed dividends.
The legislation would disqualify private prisons from this tax break and require them to be taxed twice – at both the corporate and shareholder levels – like any other corporation.
“Private prisons make our communities less safe by focusing on shareholder profits and doing nothing for rehabilitating people to become productive citizens after they have served their sentence,” said Wyden, ranking member of the Senate Finance Committee. “The twisted result of this bizarre loophole is to fatten the profits of companies getting rich off mostly poor people, worsening an already broken criminal justice system.”
“There is simply no sound policy reason why owners of private prisons should receive favorable tax treatment and subsidies, which are not available for any other private entity,” Meeks said. “This tax oddity is even more concerning considering Republican attempts to pay for massive tax cuts for the wealthy by cutting benefits for low- and moderate-income households. Our tax system must be reformed to create opportunities for advancement, not to further enrich individuals that are already doing financially well. This bill is one small step that should be taken to better align our tax code with the American dream of upward mobility.”