Published July 19, 2011
By Joel Wendland, Political Affairs
With all of the talk about the debt ceiling and deficit reduction, small business owners may just have a good idea to close the budget gap by $1 trillion over the next decade without cutting essential services or carving out benefits for retirees and the disabled.
U.S.-based multinational corporations avoid some $100 billion annually through the creation of offshore tax havens. The situation is fundamentally unfair to small business owners and hurts
taxpayers now being asked to make more sacrifices to reduce the federal deficit,
says a coalition of business groups behind a new campaign to force big business to pay its fair share of taxes.
“It’s obscene to put everything from the Small Business Administration to Medicare and Social Security on the chopping block while corporate tax dodging deprives us of major revenue,” said Scott Klinger, tax policy director of Business for Shared Prosperity.
“Today, large corporations as a group contribute just nine percent toward federal
government bills – down from 32 percent in 1952,” he added. “It’s time to plug the trillion dollar hole in the U.S. Treasury from tax haven abuse.”
“Small businesses are the lifeblood of local economies. We pay our fair share of taxes and generate most of the new jobs,” said Frank Knapp, president and CEO of the South Carolina Small Business Chamber of Commerce.
“While our members are in South Carolina, small businesses across this country, from California to Washington DC, understand that while they are paying their taxes, many U.S.-based multinational corporations are not,” he added. “That’s not fair and it makes us angry. Why should we be subsidizing U.S. multinationals that use offshore tax havens to avoid paying taxes?”
Big companies who move their capital offshore to hide it from taxation in the U.S.
still demand subsidies and benefits from taxpayer-funded programs, Klinger said.
“Increasingly, U.S. multinationals want to benefit from government spending on research, education, defense, infrastructure and much more without paying for it,” he stated.
The coalition of small business owners called for passage of the Stop Tax Haven Abuse Act, just introduced by Sens. Carl Levin, D-Mich., and Kent Conrad, D-N.D.
The bill is designed to stop the use of tax havens that both cost the federal treasury some $100 billion a year and give U.S. corporations an incentive to move profits and jobs overseas. Right
now, loopholes in the tax laws allow corporations and hedge funds to avoid U.S. taxes by setting up shell companies in places like the Cayman Islands, Bermuda and elsewhere.
Tax havens also allow corporations to report profits to their shareholders but losses to the government at tax time. Paul Egerman, founder of a medical information technology company and a member of Business for Shared Prosperity, explained it this way: “It is simply wrong that a U.S. multinational company is able to report profits to their shareholders and losses to Uncle Sam. When Google or Pfizer deploy armies of accountants to game their taxes down, it means the rest of us are left responsible for the bill. Paying our fair share of business taxes is the price we pay not only to live in a civilized society, but also a reasonable levy to conduct business in a vibrant, regulated marketplace with property rights protections, public infrastructure
and the rule of law.”
The coalition of small business groups behind this campaign includes Business for Shared Prosperity, Wealth for the Common Good, American Sustainable Business Council, the Main Street Alliance, and Growth and Justice.
Ironically, congressional Republicans tout small businesses as the “engine” that drives the American economy, but few have chosen to stand with them to halt huge tax gifts to big companies. For example, in May, Senate Republicans filibustered a bill that would have ended special subsidies to major oil companies who already earn record profits.
Defenders of offshore tax havens claim that high corporate taxes in the U.S. force company to seek tax havens elsewhere. However, a study by Citizens for Tax Justice (CTJ) found that major U.S. corporations pay substantially higher tax rates on foreign profits.
In testimony to the Senate in March, CTJ Director Robert S. McIntyre explained, “we firmly believe that business subsidies are the biggest problem in the tax code today. They are distributionally harmful, which means they create even greater inequality.”
Corporate tax rates in the U.S. in 2009 ranked 25th lowest of 26 industrialized countries (for whom data was available) in the Organization of Economic Cooperation and Development, according to CTJ. Only Iceland had lower tax rates.
Original article: http://www.politicalaffairs.net/close-the-trillion-dollar-tax-loophole-to-reduce-the-deficit/