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Report: Close Corporate Tax Loopholes
What America Could Do With $150 Billion Lost to Offshore Tax Havens
Many corporations and wealthy individuals use offshore tax havens—countries with minimal or no taxes—to avoid paying $150 billion in U.S. taxes each year.
Companies that do business in the U.S. but use offshore tax havens to avoid taxes—such as Microsoft, Exxon Mobil, and Bank of America— benefit from their access to America’s markets, workforce, infrastructure and security. Shirking the taxes that pay for these benefits violates the basic fairness of the tax system.
By shielding their income from U.S. taxes, corporations and wealthy individuals shift the tax burden to ordinary Americans, who must pick up the tab in the form of cuts to public services, more debt, or higher taxes. The $150 billion lost annually to offshore tax havens is a lot of money, especially at a time of difficult budget choices. To put this sum in perspective, consider how it could be used:
- Provide Pell Grants for 10 million students every year for four years.
- More than double federal spending on Head Start, special education grants to states, federal grants to local school districts, and other education programs.
- Pay for four years of free school breakfasts and lunches to twice the number of low-income students currently receiving them.
Jobs and the Economy
- Create new jobs in our communities by providing loan guarantees for an additional half-million small businesses.
- More than cover the $109 billion in automatic spending cuts that will take effect in 2013 if Congress does not avert the “fiscal cliff.”
- Ten years’ worth of this lost revenue would achieve 37.5 percent of the ten-year, $4 trillion debt reduction goal favored by bipartisan leaders in Congress. It would cover three-quarters of the deficit reduction needed to stabilize the debt-to-GDP ratio.
- Provide a tax cut of $1,068 for every person who filed taxes in America.
- Ensure the future of America’s renewable energy industry by providing thirty years’ worth of funding for tax incentives for the production of renewable energy—at twice the current rate of funding.
- Reduce long-term energy costs by retrofitting one in every four existing housing units in the United States for improved energy efficiency, cutting energy usage by 22 percent per residence.
- 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.
- Create world-class passenger rail systems on the major travel corridors of both coasts—building a high-speed rail line from San Francisco to Los Angeles and making major improvements to the heavily travelled Amtrak rail system between Boston and Washington, D.C.
- Provide the federal share of funding for every high-speed rail project proposed by state governments in 2009.
- Double the current level of federal funding to improve the health of vulnerable citizens, including pregnant women, infants and children with special health care needs … and continue that level of funding for 12 years.
- Triple funding for programs to end domestic violence and sexual abuse … and maintain that funding for more than half a century.
- Triple the amount of federal cancer research funding for the next 10 years.
- Further human space exploration and achieve a manned outpost on the moon before 2030.
It’s Time to End Offshore Tax Havens
Americans deserve a tax code without loopholes that allow special interests to shirk their tax burden at the expense of ordinary taxpayers. The federal government can work towards achieving that goal and recapturing much of the $150 billion lost to offshore tax havens by implementing reforms such as:
- Eliminating incentives for U.S. companies to transfer intellectual property oversees by tightening transfer pricing rules.
- Preventing corporations from reporting different income figures to different countries.
- Treating the profits of “foreign” corporations that are managed and controlled in the United States the same as domestic corporations.
- Preventing corporations from taking bigger tax credits than they are entitled to by requiring them to report full information on tax credits they receive from foreign governments.
- Preventing U.S. multinational corporations from deferring payment of U.S. tax on the profits they attribute to their foreign entities.
- Ending the “active financing exception” and the “controlled foreign corporation” look-through rule that let companies artificially shift profits offshore.
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