As Congress weighs options for tax reform and paying down the federal deficit, and as cash-strapped states scramble for ways to balance their own budgets, it’s past time to put the kibosh on tax evaders who are (legally) robbing federal and state governments of billions of dollars.
U.S. Sen. Bernie Sanders, I-Vt., this week introduced a bill to stop profitable corporations from sheltering income in the Cayman Islands and other tax havens. The legislation also would end tax breaks for companies that ship jobs and factories overseas.
Sanders’ bill and a companion measure to be introduced in the House by Rep. Jan Schakowsky, D-Ill., would yield more than $590 billion in revenue over the next decade, according to the Joint Committee on Taxation.
"At a time when we have a $16.5 trillion national debt and an unsustainable federal deficit; at a time when roughly one-quarter of the largest corporations in America are paying no federal income taxes; and at a time when corporate profits are at an all-time high, it is past time for corporate America to contribute significantly to deficit reduction," Sanders said in a statement.
Sanders was joined at Thursday’s news conference at the Capitol by Dorigen Hoffman, policy director for the Norwich-based Clean Yield Asset Management.
"We strongly support Senator Sanders’ bill to crack down on offshore tax havens and to stop rewarding companies for shipping American jobs overseas," Hoffman said in a statement. "This legislation is long overdue. It will level the playing field and make sure that large corporations pay their fair share in taxes."
Under current law, U.S. corporations are allowed to defer or delay U.S. income taxes on overseas profits until the money is brought back into the United States. U.S. corporations are also provided foreign tax credits to offset the amount of taxes paid to other countries.
According to a 2008 Government Accountability Office Report, 83 of the Fortune 100 companies in the United States use offshore tax havens to lower their taxes. Today, U.S. corporations have an estimated $1.7 trillion of un-repatriated foreign profits sitting offshore.
Just last year, the Treasury lost $150 billion in federal income tax revenue as companies shifted profits to low-tax countries, according to a study released this week by the U.S. Public Interest Research Group.
What’s more, offshore tax loopholes cost states an estimated $40 billion, according to a report in The Fiscal Times.
"Tax dodging is not a victimless offense," said Dan Smith, tax and budget advocate for U.S. PIRG Education Fund and co-author of the report. "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. States should be using that money to benefit the public."
The Corporate Tax Fairness Act would require U.S.companies to pay taxes on all of their income as they are earned by ending the deferral of foreign source income. The legislation also would take away the tax incentives for corporations to move jobs offshore or to shift profits offshore because the U.S. would tax their profits no matter where they are generated.
As Sam Blair of the Main Street Alliance, a national network of small business owners, said, corporations using offshore tax loopholes create "an uneven playing field" for small businesses and "rob states of resources" they need to create a competitive business climate.
"It’s time for action," he told The Fiscal Times. "It’s time to level the playing field."