Statement of Deirdre Cummings, MASSPIRG's Legislative Director on the introduction of the Cut Unjustified Tax Loopholes Act by Senators Carl Levin (D-MI) and Sheldon Whitehouse (D-RI). Among other provisions, this legislation would close a number of loopholes that let corporations and wealthy individuals shift income to offshore tax havens to avoid paying taxes. The provisions in the bill have been scored as saving nearly $200 billion over ten years.
America has a tax code riddled with costly loopholes that lets large companies and wealthy individuals use accounting tricks to shift income to offshore tax havens like the Cayman Islands. The winners are the big banks, pharmaceuticals, and high-tech companies, and the losers are small businesses and ordinary taxpayers, who are forced to foot the annual bill estimated at $150 billion in lost federal tax revenue and another $68 billion in Massachusuetts state tax revenue.
The CUT Loopholes Act would close a myriad of the most egregious offshore tax loopholes. This legislation is based on the premise that if a U.S. company earns profits here in the U.S., with the benefit of America’s educated workforce, infrastructure, and large consumer base, it should pay taxes in America, like small businesses and everyday taxpayers.
This strong legislation comes at a critical time, with lawmakers in Washington battling over how to reduce the deficit while funding public priorities. Instead of allowing across-the-board cuts to go through that throw the baby out with the bathwater, Congress should pass the CUT Loopholes Act, which would raise more than double what’s needed to avert the ‘sequester,’ while leveling the playing field for ordinary taxpayers.
Key provisions of the legislation include:
- Stopping U.S. companies that are managed and controlled in the U.S. from claiming to be foreign to avoid taxes;
- Closing loopholes that let high-tech and pharmaceuticals license the patents for their products to sham shell companies in tax havens so they can book their profits there and avoid taxes; and
- Requiring full and honest reporting from companies to determine if they’re booking profits to places where they are doing legitimate business, versus a P.O. box tax haven subsidiary with no employees.
Congress should pass this legislation immediately to level the playing field for small businesses, restore fairness to our tax system, and raise revenue to fund public priorities or cut the debt.
Read the MASSPIRG Education Fund’s new study revealing the impact of offshore tax havens in Massachusetts.