Small businesses pay their taxes: Why don’t big corporations?

The Hill
April 15, 2016

By Rosalind McCallard

Like a lot of small business owners at tax season, I’m rushing to get my returns in on time. But big corporations can take it easy: they get to decide when, if ever, to pay $700 billion in U.S. income taxes they owe on trillions of dollars of profits stashed offshore. Tax time is the right time to demand that big corporations start paying all their taxes every year, just like the rest of us do.

American corporations owe U.S. taxes on all their worldwide profits (minus a credit for any foreign taxes paid). But thanks to a loophole called “deferral” they can indefinitely delay paying their U.S. tax bill on earnings held overseas. No surprise that this generous break has led corporations to pile more and more profits offshore—around $2.4 trillion, according to the latest estimate by Citizens for Tax Justice.

A handful of the biggest companies clustered in the tech, banking, and pharmaceutical industries are responsible for the lion’s share of this unpaid tax debt.  Apple, for instance, owes $61 billion; drug giant Pfizer, $35 billion; Microsoft, $34 billion; and Wall Street’s Citigroup, $13 billion.

It’s an outrage, and it’s not just a question of fairness: $700 billion would fulfill a lot of unmet public needs. The tent cities of homeless that have sprung up in cities across the country are not a permanent fix. What’s required is a comprehensive solution to homelessness, and that takes money. Our schools deserve more resources, as well. My sister and her husband, both teachers, report that class size grows every year while resources do not.

And of course, they are not alone in crying out for more public investment. All across the country, roads are gridlocked and potholed; poor and middle-class kids are denied preschool, and medical advances are stalled for lack of funding. Families in Flint, Michigan, and dozens of other communities nationwide can’t trust the water coming from their own household taps because we’ve ignored our decaying infrastructure for so long.   Small business owners like me are impacted in three ways when big corporations don’t pay their fair share of taxes. First, like all taxpayers, we pick up the tab for corporate tax avoidance: either by paying higher taxes ourselves, receiving subpar public services, or taking on more government debt.

Second, our businesses suffer from a lack of investment in our communities. If companies aren’t paying their employees a living wage, this potentially impacts our sales. Proven anti-poverty programs, like the Earned Income Tax Credit, can’t pump enough cash into local economies if they’re underfunded.

Finally, big corporations that don’t pay their taxes have yet one more competitive advantage over small businesses, like mine, that do. And believe me, we in the small business community don’t need the playing field tilted any further against us.

There was recently some good news in the fight against corporate tax avoidance. The Obama Administration issued rules that make it harder for a company to pull off the ultimate tax dodge: merging with a foreign firm to change its legal address to a tax haven to wipe out the U.S. taxes owed on its offshore profits. Pfizer was about to walk away with the $35 billion it owes us through one of these deals (called “inversions”), but the new rules stopped it dead in its tracks.

To get more wins like that, we need Congress to outlaw the worst corporate tax-dodging abuses. We must tell the Senate Finance Committee, which writes tax law, that we want companies to pay the $700 billion they owe now, and to end “deferral” so that they stop accumulating these enormous untaxed offshore profits in the future.

I pride myself on delivering fresh, healthy sandwiches to my customers. The healthy message we can all deliver this April as we settle our tax bills is that corporations need to end their offshore tax dodging and pay what they owe.

McCallard is co-owner of sandwich wholesaler Snackrilege in Portland and a member of the Main Street Alliance of Oregon.


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