Ryan Pierannunzi
RIPIRG Education Fund
Today the Rhode Island Public Interest Research Group (RIPIRG) Education Fund released a new study revealing that Rhode Island lost $229 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 Ryan Pierannunzi, Tax and Budget Associate for RIPIRG. “Rhode Island 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 $229 million lost in Rhode Island would have been enough to pay the salaries of over 3,700 teachers, based on the average teacher’s salary in Rhode Island ($60,923). The $229 million also would have been more than enough to eliminate the state’s projected $69 million budget deficit or cover Rhode Island College’s in-state tuition for over 30,000 students ($7,598).
Tax havens are used by both wealthy individuals and corporations. In Rhode Island, $164 million is lost from the corporate abuse of tax havens and $65 million from individuals.
“As we work to get our country back on the right track, it is critical that we get corporations and wealthy individuals to pay their fair share in taxes,” said Congressman David N. Cicilline, who introduced the Offshoring Prevention Act during the 112th Congress and is planning to do the same later this year in order to eliminate tax breaks for companies that move jobs overseas. “I applaud RIPIRG’s effort to highlight the use of offshore tax havens, and I look forward to working with them to close these loopholes.”
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.
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,” Pierannunzi 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:
Here are some increasingly notorious ways that some of America’s largest corporations drastically shrink their tax bill:
You can download the report, “The Hidden Cost of Offshore Tax Havens: State Budgets Under Pressure from Tax Loophole Abuse,” here.