Offshore Tax Dodging Blows a $843 Million Hole in Missouri Budget

Media Contacts
Alec Sprague

Director, New Member Strategies, The Public Interest Network

New MoPIRG Foundation Study Exposes the Real Cost of Tax Loopholes for Missouri Residents

MoPIRG Foundation

SAINT LOUIS, February 5th – With Missouri in the midst of a budget crisis, MoPIRG Foundation, joined by small business owners, released a new study revealing that Missouri lost $843 Million due to offshore tax dodging in 2012. Many of America’s wealthiest individuals and largest corporations, use tax loopholes to shift profits made in America to offshore tax havens, where they pay little to no taxes.

“Tax dodging is not a victimless offense. When corporations skirt taxes, the public is stuck with the tab. And since offshore tax dodgers avoid both state and federal taxes, they hurt everyday taxpayers twice,” according to Alec Sprague, Field Organizer for MoPIRG. “Missouri should be using that money to benefit the public.”

All told, state taxpayers across the country lost nearly $40 billion last year from offshore tax loophole abuse. To put that amount in context, $40 billion roughly equals the total amount spent by all state and local governments on firefighters in 2008. It’s also enough money to cover the educational costs for 3.7 million children for one full year.

The $843 Million lost in Missouri would have been enough to easily finance the Missouri House plans for highway and infrastructure repair, averting the sales tax proposed for these upgrades, or to have paid the healthcare costs for over 128,000 Missourians, or to have financed what Missouri would need to chip in for Medicaid expansion, as part of compliance with the federal health care law, two and half times over. 

To further put this into context, the sum of money lost to Missouri taxpayers last year from offshore tax dodging is enough to have built another 64 Gateway Arches – that’s one every 4 miles from Saint Louis to the Kansas border.

Tax havens are used by both wealthy individuals and corporations. In Missouri, $554 Million is lost from the corporate abuse of tax havens and $289 Million from individuals.

As of 2008, at least 83 of the top 100 publicly traded corporations in the U.S. used tax havens, according to the Government Accountability Office. At the end of 2011, 290 of the top Fortune 500 companies reported that they collectively held a staggering $1.6 trillion offshore. By using offshore tax havens, corporations and wealthy individuals shift the tax burden to ordinary Americans, forcing us to make up the difference through cutting public services, growing our already big deficit, or raising taxes on everyday citizens.

“These cuts have real effects.” Shared Lew Prince, managing partner of Vintage Vinyl, a local small business. “For my family, [recent budget] cuts meant that my sister, who worked 5 years at the UMSL library by day while earning her Masters in Library Science at night, was let go because UMSL couldn’t afford to keep her after she earned her degree.”

“Maude’s Market does its small part to make our community and our state better.” Said Maude Bauschard, owner of a local small food store and subscription grocery service. “The corporations that benefit from doing business in our state should do the same and that starts with paying into the system that helped them build those profits.”

At the national level, offshore tax loopholes cost federal taxpayers $150 billion each year, which would be more than enough to cover the scheduled spending cuts that are set to take effect in just a few weeks.

“Some budget decisions are tough, but closing the offshore tax loopholes that let large companies shift their tax burden to the rest of us is a no-brainer,” Sprague added.

States should not wait for federal action to curb tax haven abuse. The study proposes several policy solutions that states should explore right away, including:

• Decoupling state tax systems from the federal tax system;

• Requiring worldwide combined reporting for multinational corporations;

• Requiring increased disclosure of financial information; and

• Withholding state taxes as part of federal FATCA (Foreign Account Tax Compliance Act) withholding.

 Here are some increasingly notorious ways that some of America’s largest corporations drastically shrink their tax bill:

• Google used accounting techniques nicknamed the “double Irish” and the “Dutch sandwich,” which involved two Irish subsidiaries and one in Bermuda, to help shrink its tax bill by $3.1 billion from 2008 to 2010.

• Wells Fargo paid no federal income taxes in 2008, 2009, and 2010, despite being profitable all three years, largely due to its use of 58 offshore tax haven subsidiaries.

• Microsoft avoided $4.5 billion in federal income taxes over three years by using sophisticated accounting tricks to artificially shift its income to tax-friendly Puerto Rico. The company pays its Puerto Rican subsidiary 47% of the revenue generated from its American sales, despite the fact that those products were developed and sold in the U.S.

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MoPIRG Foundation conducts research and public education on behalf of consumers and the public interest. Our research, analysis, reports and outreach serve as counterweights to the influence of powerful special interests that threaten our health, safety or well-being.