By Rep. Lloyd Doggett (D-Texas)
The Hill’s Congress Blog
July 26, 2011
As Washington considers solutions to our debt crisis, I believe a fundamental principle — before we consider cutting vital programs or raising tax rates—is ensuring everyone pays their fair share. I always find it impossible to explain why a pharmacist in Lockhart, Texas, or a small retail store in San Marcos has to pay more in taxes because some multinational can duck and dodge its obligations by moving money to Bermuda or the Cayman Islands.
Closing loopholes that allow billions in tax dollars to slip through the cracks each year would restore much-needed revenue, and would also help our economic growth by leveling the playing field for small business and improving public confidence in our tax system. In particular, the widespread use of international tax games in offshore tax havens costs the U.S. Treasury an estimated $100 billion each year in lost tax revenues. Our failure to close these tax loopholes means we are forced to borrow more from foreign creditors or make hardworking families and small businesses pick up the slack. Equally important, international corporate tax loopholes provide incentives to invest abroad instead of at home, shipping jobs offshore and harming our local communities. The Stop Tax Haven Abuse Act that I am introducing again this Congress with Sen. Carl Levin (D-Mich.) takes aim at these abuses.
This bill will stop some of the most egregious offshore shenanigans and provide powerful new tools to combat tax abuses and reduce the incentives to send U.S. jobs and money offshore. With this economy still precarious, what better source for needed tax revenue than those who are shifting jobs abroad to avoid paying taxes at home? America needs the revenue and American firms who play by the rules deserve a level field.
Unfortunately, while most of America understands this self-evident proposition, there are still many, aided by well-paid lobbyists, who are pushing in the opposite direction. Among the giveaways they advocate is a so-called “corporate repatriation tax holiday” that would reward multinational corporations for stashing billions in tax havens by giving them a $79 billion tax break on this overseas money. While billed as a job creation measure, prior attempts in 2004 amounted to a massive windfall for a few multinationals and their shareholders, while doing nothing to create jobs or stimulate the economy.
Even worse, this corporate tax holiday encourages corporations to shift even more jobs and profits overseas hoping for the next tax giveaway. Remarkably, the proponents’ audacity is not limited to a temporary tax holiday; some would go even further, pushing for a permanent tax exemption on foreign profits. It is not hard to see how a system that lets investment overseas completely escape U.S. taxes is a recipe for job creation abroad and more layoffs at home.
We hear a lot these days about shared sacrifice, but usually from people who expect the most from those that have the least. Before we ask for greater sacrifice from hard-working families and small businesses, we should first ask these multinational corporations to sacrifice their international tax loopholes and we should refuse to open new ones. Providing a level playing field and expecting everyone to pay their fair share should be the foundation of our tax system, and closing these tax loopholes — through legislation like the Stop Tax Haven Abuse Act — should be a critical element of any deficit reduction package.