Small business consistently best at producing new jobs and paying fair share of taxes

The new September ADP National Employment Report is out today saying that 162,000 new private-sector jobs were created in the U.S. last month. And once again small businesses with less than 50 workers created the most new jobs—81,000.

Since the beginning of this year new jobs from small businesses have accounted for around 50% of all new employment. The high was 56% in January and the low being 44.8% in July. The average for the year is 49.95%. So the 50% new jobs figure for small business in September was right on the mark.

On another issue, small businesses are making their voices heard on the issue of big corporations and the wealthy using offshore tax havens to avoid paying U.S. taxes. This means that the rest of us, including every real small business in this country, are subsidizing the government services (courts, defense, infrastructure, first responders, etc.) that the multinational corporations and the millionaire/billionaire crowd are using but don’t want to pay for.

These “moochers” also are depriving the federal government of resources we need to invest in growing our economy as discussed in the story below.

CNN Money
October 3, 2012

Big firms that avoid taxes are moochers, small companies say

By Jose Pagliery@CNNMoney

NEW YORK (CNNMoney) — When big companies offshore profits to dodge taxes, small business owners say they are left footing the bill — and they’re not happy about it.

A U.S. Senate panel recently reviewed how Microsoft and Hewlett-Packard shaved billions off their taxes in recent years by moving profits offshore.

Microsoft (MSFT, Fortune 500) avoided paying nearly $7 billion by transferring almost half of its U.S. revenue to a subsidiary in Puerto Rico and moving patents to foreign subsidiaries.

Hewlett-Packard (HPQ, Fortune 500) also dodged taxes — although the report didn’t indicate how much — by creating subsidiaries abroad and making loans to itself.

Small business owners say they can’t offshore profits and take advantage of these opportunities. The strategies require a worldwide presence and are either too complex or too costly.

But those business owners say that’s not the only issue. They’re bothered by the effect of depleting the government’s revenue stream, which creates pressure to cut government spending that the nation’s 27 million businesses rely on.

“This tax money goes to support the infrastructure that allows our businesses to be successful,” said Joseph Rotella, owner of Spencer Organ, an instrument repair company in Waltham, Massachusetts.

In 2010, Spencer Organ paid $47,000 in taxes while Microsoft gave $4.4 billion. Still, they paid nearly the same effective federal tax rate of 25%.

“These big companies avoid paying their fair share,” Rotella said, noting that highly profitable firms rarely pay the actual top federal rate of 35%.

U.S. powerhouses are defending their offshoring of profits by claiming the U.S. corporate taxrate is too high. Currently, a corporation is taxed abroad at the foreign country’s rate, and if the United States tax rate is higher, profits heading back to the United States are taxed the difference.

To hotel owner Sue Edgington, whose Adventure Innis located deep in the woods of northeast Minnesota, the issue of paying taxes is one of patriotism. Like most small business owners, she’s fiscally conservative and doesn’t gladly fork over more in taxes. However, she said that when companies avoiding paying them, it threatens funding to public colleges like the one she attended — and protection of wildlife like the kind that draws tourists her way.

“It angers me,” she said. “It’s morally wrong. That money is being pulled out of our economy. There’s a moral obligation to keep it here, because they live in this country and have been able to take advantage of that.”

Her frustration could be directed at several of the nation’s top companies. Recent financial data reviewed by the Senate panel showed how tech companies Apple (AAPL, Fortune 500), Cisco (CSCO, Fortune 500) and Dell (DELL, Fortune 500), as well as others like American staples Johnson & Johnson (JNJ, Fortune 500), Coca-Cola (CCE, Fortune 500) and Wal-Mart (WMT, Fortune 500) all keep anywhere from 67% to 100% of their cash as “foreign cash.”

One small business group, the American Sustainable Business Council, is pushing for the passage of the Stop Tax Haven Abuse Act. The bill seeks to restrict the corporate use of havens like Bermuda and the Cayman Islands. The legislation has a long road ahead, though, as it has died in Congress several times in recent years.

Scott Klinger, tax policy director for the group’s partner, Business for Shared Prosperity, said the bill would help the United States raise $1 trillion over a decade.

“When multinationals use accounting acrobatics, they not only shift the tax burden to small businesses. They also create pressure to cut spending on community development and education spending. If those workers lose their jobs to budget cuts, then Main Street loses its customers,” Klinger said.

http://money.cnn.com/2012/10/03/smallbusiness/tax-avoidance/