While a budget battle led to a government shutdown, and a debt ceiling fight looms ahead, Congress has seemingly forgotten about one fair and timely budget solution: Closing the offshore tax haven abuse that costs taxpayers an estimated $150 billion in federal revenue every year.
Tax loopholes aren’t illegal, but they’re not right. By using accounting tricks and taking advantage of our inefficient and loophole-ridden tax code, many large U.S.-based multinational corporations make their profits appear to be generated offshore, thereby avoiding paying U.S. taxes.
Some glaring examples: Microsoft keeps about $60 billion offshore, on which it would owe nearly $20 billion in U.S. taxes; Pfizer uses accounting gimmicks to shift the location of taxable profits offshore, allowing them to report no federal taxable income in the U.S. in five years; and Google achieved an effective tax rate of just 2.4 percent on its overseas profits between 2008 and 2010.
This corporate abuse of offshore tax havens allows corporations to avoid an estimated $90 billion in federal income taxes every year, plus $40-70 billion evaded by wealthy individuals who shift money offshore.
This tax dodging also deprives state governments of billions of dollars in revenue. Altogether, tax havens cost state governments nearly $40 billion in lost revenues in 2011. In Michigan alone, the state lost over $700,000,000 worth in state revenue due to offshore tax loopholes, according to a PIRGIM report.
Fortunately, Senator Carl Levin of Michigan and co-sponsors Sheldon Whitehouse, D-Rhode Island, Mark Begich, D-Alaska, and Jeanne Shaheen, D-New Hampshire, have introduced legislation that would close the most deplorable loopholes and save taxpayers $200 billion over ten years.
When wealthy individuals and large corporations abuse offshore tax havens, Americans and small businesses are forced to shoulder the burden. Every dollar that corporations avoid in taxes is balanced by average citizens paying higher taxes and coping with cuts to public programs — not to mention a higher federal deficit.
The $150 billion we lose in tax havens a year would be more than enough to cover across-the-board spending cuts if a government shutdown were to occur. It would also be enough to provide Pell grants to 10 million students for four years of college; guarantee loans for half a million small businesses; or revamp America’s aging transportation infrastructure by building 15 commuter rail lines, 50 light rail transit lines, and more than 800 rapid transit bus lines.
The latest drama in Washington demonstrated shutdown of our federal government in the name of balancing the budget.
Meanwhile, $150 billion in revenue escapes us every year, because Congress refuses to stand up to big corporations and stop their tax haven abuse.
A vote for the Stop Tax Haven Abuse Act is a vote for the public.
As we move through this year’s budget crisis, Senator Debbie Stabenow should support this bill, and stand against big corporations lobbying to protect their tax breaks.
Eric Mosher is a program associate with Michigan Public Interest Research Group (PIRGIM).