Business owners know the importance of investing to keep their companies competitive. When essential equipment breaks, they fix it if they can or replace it if they canít. They donít respond by cutting their budget for maintenance and investment. Yet thatís what Congress has done.
In the face of failing infrastructure ó from bridges to sewer lines ó federal spending on infrastructure was slashed 14 percent this year. Thatís on top of years of neglected maintenance and modernization, leaving the United States falling farther behind our global competitors.
Congress points to the deficit as an excuse for choosing cutbacks over investment. But the deficit is partly a product of tax dodging by big corporations.
U.S. multinational corporations have gamed the tax system by lobbying for and exploiting accounting loopholes to shift more of their U.S. profits offshore in order to avoid taxes they would otherwise owe. Abuse of offshore tax havens by corporations costs the U.S. Treasury an estimated $90 billion a year ó double the $45 billion in infrastructure spending the federal government cut this year.
These loopholes hurt small businesses twice. First, they rob our nation of money for investments on the infrastructure businesses and our customers depend on, from roads and bridges to public transit and schools. Second, they tilt the playing field against American small businesses, who arenít gaming the tax system, to move their jobs and profits offshore.
Americaís large corporations paid an effective tax rate of just 12.6 percent in 2010, according to the U.S. Government Accountability Office ó a lower rate than most small business owners pay. It wasnít always this way. In the 1950s, corporate taxes accounted for nearly one-third of federal government revenue; last year, they accounted for less than 10 percent.
Itís not that big businesses canít afford to pay what they used to. Quite the contrary ó corporate profits as a percent of gross domestic product are at all-time highs, while federal corporate tax payments as a percent of GDP are near 50-year lows.
The last thing our government should be doing is rewarding tax dodgers. Shockingly, there are proposals to do just that ó in the name of investment in our nationís infrastructure.
President Obama proposed establishing a small, yet unspecified, fee on the more than $2 trillion of profits held in tax havens by U.S. corporations and using the revenue for infrastructure spending. With this fee paid, U.S. corporations could bring these offshore profits back to the United States without paying the 35 percent rate the tax code calls for.
The last time corporations got this kind of break was through the so-called American Job Creation Act of 2004. The results were terrible. Most of the ďrepatriatedĒ profits went to paying shareholder dividends, as corporations intensified their efforts to disguise their U.S. profits as foreign profits in anticipation of another tax holiday. Meanwhile, many of them cut thousands of jobs.
Vice President Joe Biden waits to conduct a mock swearing-in ceremony with Sen. Brian Schatz, D-Hawaii, in the Capitol's Old Senate Chamber, December 2, 2014. Schatz was sworn in to serve the remainder of his term since he was appointed to the seat after Sen. Daniel Inouye, D-Hawaii, passed away.