With President Barack Obama’s Plan A that includes cuts to Social Security benefits and Speaker John A. Boehner’s Plan B that continues tax cuts for most rich Americans, it is time to consider Plan C — closing the costly loopholes that allow U.S. multinational corporations to use accounting tricks to dodge as much as $100 billion in taxes each year.
Bloomberg recently reported, for example, that Google has been using accounting maneuvers to shift $10 billion of profits to tax-free Bermuda, thereby shaving about $2 billion a year from its global tax bill. Earlier in the fall, the Senate Homeland Security and Governmental Affairs Subcommittee on Permanent Investigations found similar profit shifting and tax avoidance by Microsoft, Apple and Hewlett-Packard that are part of plummeting U.S. corporate tax revenues. We need to change the laws that enable this massive tax avoidance.
America’s small business owners across the political spectrum reject big business attempts to dress up their U.S. profits in Bermuda shorts in order to reduce their tax bills. In a nationwide poll of small business owners earlier this year, 91 percent of those surveyed said it is a problem that U.S. multinational corporations use accounting loopholes to shift their U.S. profits to offshore subsidiaries — often little more than a brass nameplate and a P.O. Box — to avoid taxes.
While U.S. corporate profits are at a 50-year high, U.S. corporate income tax collections as a percent of GDP are at a 50-year low. In 1952, U.S corporate income taxes accounted for 32 percent of the federal government’s revenues; last year this number was less than 8 percent. Corporations want to benefit from America’s market, infrastructure and public services — everything from roads to schools to first responders to taxpayer-funded research; they want others to pay for it.
Unfortunately, President Obama and many members of Congress favor revenue-neutral corporate tax reform, which would make today’s historically low corporate tax contributions permanent, depriving the Treasury of trillions of dollars of corporate tax revenue in the decades to come. The last thing we need is to reward corporations for shifting profits and jobs offshore.
“There’s nothing neutral about big business tax dodging — it’s unpatriotic plain and simple,” said Lew Prince, owner of St. Louis-based Vintage Vinyl, and one of a dozen small business owners who recently met with President Obama at the White House.
Among Fortune 500 corporations, Citizens for Tax Justice reports that “290 have revealed that they, collectively, held nearly $1.6 trillion in profits outside the United States at the end of 2011. This is one indication of how much they might benefit from a so-called ‘territorial’ tax system, which would permanently exempt these offshore profits from U.S. taxes.”
If Congress is looking for billions, rather than look to retirees or the poor, members should look offshore. Dollars that Congress votes to take from low-income Americans through cuts to food stamps or the Earned Income Tax Credit or from Social Security recipients through adoption of a stingier cost-of-living formula are dollars that will not be spent at corner grocers or other Main Street businesses.
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.