First Step to Avoid the Fiscal Cliff: Close Offshore Tax Loopholes
Offshore Tax Dodging Costs U.S. $150 Billion Annually;
New Report Illustrates Impact with 16 Dramatic Ways Lost Revenue Could Be Used
MADISON, December 6th – With Congress scrambling to agree on ways to reduce the deficit, WISPIRG joined with Mayor Paul Soglin, UW Student Mariana Debernardini, and owner of Chad’s Carpentry, Chad Speight, today to point out a clear first step to avoid the “fiscal cliff”: closing offshore tax loopholes. Many of America’s largest corporations and wealthiest individuals use accounting gimmicks to shift profits made in America to offshore tax havens, where they pay little to no taxes. This tax avoidance costs the federal government $150 billion in tax revenue each year. WISPIRG released new data illustrating the size of this loss with 16 dramatic ways $150 billion could be spent.
“When corporations skip out on their taxes, the rest of us are left to pick up their tab.” said Joe Rasmussen, Program Associate for WISPIRG. “Right now, this kind of tax dodging is perfectly legal, but it’s not fair and it’s time to put an end to it.”
At least 83 of the top 100 publically traded corporations in the U.S. make use of tax havens, according to the GAO. American companies like Wal-Mart, Coca Cola, and Pfizer – which benefit from our educated workforce, infrastructure, and security – keep more than 70% of their cash offshore. Thirty of America’s largest, most profitable corporations actually made money off our tax code between 2008 and 2010 by avoiding taxes altogether and receiving tax rebates from the government. By using offshore tax havens, corporations and wealthy individuals shift the tax burden to ordinary Americans, forcing us make up the difference through cuts to public services, a bigger deficit, or higher taxes for everyday citizens.
To illustrate the size of the revenue lost each year to tax havens, WISPIRG presented 16 specific ways it could be spent, in a fact sheet released today, titled “What America Could Do With $150 Billion Lost to Tax Havens,” Examples include:
- Provide Pell Grants for ten million college students every year for four years;
- Bring transportation into the 21st Century by funding construction of 15 commuter rail lines, 50 light rail transit lines and more than 800 bus rapid transit lines.
- Provide a tax cut of $1,068 for every person who filed taxes in America
Perhaps most strikingly, reclaiming the $150 billion lost to offshore tax loopholes would more than cover the $109 billion in automatic spending cuts that will take effect in 2013 if Congress fails to avert the “fiscal cliff.” In fact, over ten years this lost revenue would be enough to achieve 37.5% of the $4 trillion debt reduction goal for that period favored by bipartisan leaders in Congress.
“There are some tough budget decisions ahead, but closing the offshore tax loopholes that let large companies shift their tax burden to the rest of us should be an easy one.” Rasmussen added.
To download the fact sheet, “What America Could Do With $150 Billion Lost to Tax Havens,” go to http://www.wispirg.org/reports/wip/what-america-could-do-150-billion-lost-offshore-tax-havens.
A Few Ways some of America’s largest corporations drastically shrink their tax bill:
- Google uses techniques nicknamed the “double Irish” and the “Dutch sandwich,” involving two Irish subsidiaries and one in Bermuda – a tax haven – that helped shrink its tax bill by $3.1 billion between 2008 and 2010.
- Wells Fargo paid no federal income taxes between 2008 and 2010 despite being profitable all three years in part due to its use of 58 offshore tax haven subsidiaries.
- Microsoft avoided $4.5 billion in federal income taxes over three years using sophisticated accounting tricks to artificially shift its income to tax-friendly Puerto Rico. The American company pays its Puerto Rican subsidiary 47% of the revenue generated from selling products in America that were developed in America.
# # #
WISPIRG, the Wisconsin Public Interest Research Group, takes on powerful interests on behalf of its members, working to win concrete results for our health and our well-being. www.wispirg.org