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Here we go again. First there were across-the-board federal budget cuts known as the sequester. Then came the government shutdown. Finally, we barely escaped a national default when Congress passed a short-term deal to increase the debt ceiling. And just when most Americans thought it was over, we find ourselves in another possible budget showdown, facing new fiscal deadlines early next year.
These jolts to our economy are painful for small businesses, which work on thin margins and are sensitive to financial disruption. Our organization, which represents America’s 28 million small businesses, wants to make sure the needs of real Main Street businesses are on the minds of congressional negotiators as they hammer out a tax-and-spending deal over the next few weeks.
The past several years of deficit-reduction have been hard on small businesses. Funding for Small Business Administration loans, education, infrastructure and research have all been cut. In addition to reducing important services, slashing public investment in a sluggish economy reduces consumer demand. We know from our opinion polling that increasing consumer demand is small businesses’ No. 1 priority. The Great Recession ended on Wall Street shortly after it started, and large corporations are making record profits. But for small businesses, tough times linger.
We need a balanced approach that strengthens our economy while asking huge corporations to pay their fair share. This is a strategy small-business owners support. Small Business Majority’s scientific opinion polling found that 90 percent of entrepreneurs believe large corporations use loopholes to avoid paying taxes that small businesses must pay. And three-quarters say their small business is harmed when loopholes allow big corporations to avoid taxes.
But over the years, lawyers and lobbyists have created untold numbers of special tax breaks for their corporate clients — breaks small businesses don’t enjoy. Household names such as General Electric Co., Boeing Co. and Verizon Communications Inc. have gone several years without paying any federal income tax at all, according to Citizens for Tax Justice.
When big corporations avoid their fair share of taxes, small-business owners have to pay more to make up the difference, further skewing a playing field already slanted against them.
Some of the most blatant corporate tax avoidance happens offshore, through dummy subsidiaries whose only physical existence is often a Caribbean post office box. Offshore corporate tax dodging costs us $90 billion a year, by one estimate. It also costs jobs, as corporations move operations overseas to exploit tax breaks.
Fortunately, there are signs that Congress is beginning to make progress on this issue. Senate Finance Chairman Max Baucus, D-Mont., recently proposed several reforms that would restrict tax avoidance by multinational corporations. While this would raise money through closing corporate tax loopholes, it would reward those same companies with lower tax rates. And less money would be available to make key investments needed to grow our economy.
Sen. Patty Murray, D-Wash., co-chairwoman of the conference committee tasked with breaking the budget logjam, and Sen. Carl Levin, D-Mich., a longtime investigator of corporate tax abuse, have better ideas. Murray recently proposed ending the tax break corporations get for paying executives with stock options and other bonuses instead of salaries. She also suggests eliminating the “check-the-box” loophole that allows corporations to easily hide profits of their offshore subsidiaries.