Picking up the Tab: Average Citizens and Small Business Owners Pay the Price for Offshore Tax Havens

With Tax Day approaching, a new U.S. PIRG report found the average tax filer in 2011 would have to pay $426 to make up for revenue lost from corporations and wealthy individuals shifting income to offshore tax havens. The report additionally found that if they were to cover the cost of the corporate abuse of tax havens in 2011, the average American small business would have to pay $2,116.

“When corporations shirk their tax burden by shifting profits legitimately made in the U.S. to offshore tax havens like the Caymans, the rest of us must pick up the tab through either cuts to public spending priorities, higher taxes, or more debt,” said Dan Smith, Tax and Budget Associate for U.S. PIRG and one of the report’s co-authors. “Responsible small businesses are further hurt by corporate tax dodging because they are put at a competitive disadvantage since they can’t hire armies of well paid lawyers and accountants to use offshore tax loopholes.”

Every year, corporations and wealthy individuals avoid paying an estimated $100 billion in taxes by shifting income to low or no tax offshore tax havens. Of that $100 billion, $60 billion in taxes are avoided specifically by corporations. A GAO study found that at least 83 of the top 100 publicly traded corporations use offshore tax havens.

“The simple fact of the matter is this: tax breaks for Big Oil, corporate jets, and companies that send jobs overseas have the practical effect of raising taxes on everyone else. That’s not right. That’s not smart. That’s not fair. And it’s high time we do something about it,” said Congressman Van Hollen.

“Taxes are not just numbers in spreadsheets,” said Joseph Rotella, owner of Spencer Organ Company in Waltham, Massachusetts, and who spoke at the event. “Taxes provide the revenues that pay for roads, bridges, public safety, public schools, public transportation and other infrastructure and services my business and my customers count on. We need to stop the tax haven abuse that lets big corporations avoid paying their fair share and gives them an unfair advantage in the marketplace.”

Breaking the data down by state, U.S. PIRG found that residents of Delaware and Minnesota picked up the largest share of the tab - $1,317 and $774 respectively.

The report recommends closing a number of offshore tax loopholes, many of which are included in the Stop Tax Haven Abuse Act (H.R. 2669) and Cut Unjustified Tax Loopholes Act (S.2075). Congressman Van Hollen is a cosponsor of the House legislation.

“Families and small business unfairly bear a greater burden when offshore tax dodges game the system,” said Congressman Lloyd Doggett (D-Texas), a senior member of the House Ways and Means and Budget Committees. “We cannot afford the revenue lost to these corporate tax avoidance schemes. The ‘Stop Tax Haven Abuse Act,’ which I authored, offers powerful new tools to combat these abuses and would bring jobs and tax dollars back home.”

“It is appalling that large, profitable U.S. companies can get out of paying for the nation’s infrastructure, education system, security, and large market that help make them successful,” concluded Smith.