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April 15, Boston– As hardworking Americans file their taxes today, it’s a good time to be reminded of how ordinary taxpayers pick up the tab for the loopholes in our tax laws. MASSPIRG was joined today by Representative Josh Cutler, (Duxbury) and Massachusetts Fair Share to release a new study which revealed that the average Massachusetts taxpayer in 2013 would have to shoulder an extra $1,886 in combined state and federal taxes to make up for the revenue lost due to the use of offshore tax havens by corporations and wealthy individuals. The group also called on lawmakers to support an amendment to the budget to close an off shore tax haven loophole in Massachusetts.
“Average taxpayers and small business owners foot the bill for offshore tax dodging. Every dollar in taxes companies avoid by booking profits to shell companies in off shore tax havens must be balanced by cuts to public programs, higher taxes for the rest of us, or more debt,” said Deirdre Cummings, Legislative Director for MASSPIRG.
Every year, corporations and wealthy individuals avoid paying an estimated $184 billion in state and federal income taxes by using complicated accounting tricks to shift their profits to offshore tax havens. Of that $184 billion, $110 billion is avoided specifically by corporations.
The report additionally found that the average Massachusetts small business would have to pay $6,269 to cover the cost of offshore tax dodging by large corporations. Offshore tax havens give large multinationals a competitive advantage over responsible small businesses which don’t have subsidiaries in tax havens to reduce their tax bills. Small businesses get stuck footing the bill for corporate tax dodging.
“As a small business owner nothing bothers me more than to see large corporations dodge their tax responsibility by stashing cash overseas and then leaving us to pick up the tab,” said Representative Josh Cutler, “I am filing an amendment to the budget to take a step toward remedying that imbalance by closing an offshore tax haven loophole here in Massachusetts.”
A reform to reduce tax avoidance through off shore tax havens was filed as an amendment to the House FY15 budget, #1142. The reform, already in place in Oregon and Montana, would require that companies treat profits made in Massachusetts and funneled to known tax havens like the Cayman Islands as domestic taxable income. Making this change to the tax code would save Massachusetts taxpayers $79 million a year.
“We’re hoping more legislators get behind this amendment, and it becomes law here in Massachusetts, said Nathan Proctor, State Director, Massachusetts Fair Share. “It might not make Tax Day any easier, but it would certainly make it more fair.” Massachusetts Fair Share presented lawmakers with 4,000 petition signatures in support of closing the tax loophole.
Many of America’s largest and best-known corporations use these complex tax avoidance schemes to shift their profits offshore and drastically shrink their tax bill. GE, Microsoft, and Pfizer boast the largest offshore cash hoards:
- General Electric paid a federal effective tax rate of negative 11.1 percent between 2008 and 2012 despite being profitable all of those years. The company received net tax payments from the government. GE maintains18 subsidiaries in tax haven in 2013 and parked $110 billion offshore. One of the company’s most lucrative loopholes just got renewed by the Senate Finance Committee. GE alone hired 48 lobbyists to push to renew the “active financing exception.”
- Microsoft avoided $4.5 billion in federal income taxes over a three year period by using sophisticated accounting tricks to artificially shift its income to tax-friendly Puerto Rico. Microsoft maintains five tax haven subsidiaries and keeps $76.4 billion, on which it would otherwise owe $24.4 billion in additional U.S. taxes.
- Pfizer paid no U.S. income taxes between 2010 and 2012 because the company reported losses in the U.S. during those years, despite making 40 percent of its sales in the U.S. and earning $43 billion worldwide. The company operates 128 subsidiaries in tax havens and has $69 billion parked offshore which remains untaxed by the U.S., according to its own SEC filing.
In addition to state action, the report recommends closing a number of offshore tax loopholes. Many of these reforms are included in the Stop Tax Haven Abuse Act, introduced by Sen. Levin in the Senate (S.1533) and Rep. Doggett in the House (H.R. 1554).
Click here to see an earlier study showing how states can crack down on offshore tax dodging.
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MASSPIRG, the Massachusetts Public Interest Research Group, is a non-profit, non-partisan public interest advocacy organization that takes on powerful interests on behalf of its members, working to win concrete results for our health and well-being.
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