Tax

The Twinkie Tax

By | Jessica Wilson
Program Associate
News Release | Georgia PIRG Education Fund | Tax

Offshore Tax Haves Cost Georgians $2.46 Billion in 2010

 Major corporations and some individuals avoid a total of as much as $100 billion a year in federal taxes by “off-shoring” the profits they make here in the U.S. or by setting up sham headquarters in tax haven countries. As a result, Georgia taxpayers are left footing the bill.

Report | Georgia PIRG Education Fund | Tax

Tax Shell Game

Tax havens are countries with minimal or no taxes, to which U.S.-based multinational firms or individuals transfer their earnings to avoid paying taxes in the United States. Users of tax havens benefit from access to America’s markets, workforce, infrastructure and security, but pay little or nothing for it—violating the basic fairness of the tax system.

Abuse of tax havens inflicts a price on other American taxpayers, who must pay higher taxes—now or in the future—to cover the government’s revenue shortfall, or must deal with cuts in government services. 

Report | Georgia PIRG Education Fund | Tax

Tax Shell Game

Many of the largest corporations in our country hide profits made in the United States in offshore shell companies and sham headquarters in order to avoid paying billions in federal taxes. The result is massive losses in revenue for the U.S. Treasury – which ultimately must be made up by taxpayers.  The debt of a few is transferred to many – and to future generations. The U.S. Senate confirmed in the recently-passed fiscal year 2010 budget resolution that the use of offshore tax havens by large corporations “means that honest taxpayers face a higher burden.”   

Key Findings
• The cost to taxpayers due to the use of offshore tax havens is as high as $100 billion per
year - $1 trillion over 10 years. U.S.-based individuals and corporations who pay taxes
on their revenues must shoulder this burden for those who do not.
• Taxpayers must shoulder the burden – WashPIRG Education Fund calculated each
state’s taxpayer contribution proportional to their yearly federal contribution to make up
for the $100 billion lost (See Figure 1). The total burden shifted to Washington taxpayers
is as high as $2,456,043,505 a year.
• Our allies in other nations are also calling for decisive action to reign in these abusive
tax havens. The Group of 20 (G-20), which provides a forum for world financial leaders
to promote global economic stability, recently issued a communique providing for
sanctions against tax haven countries.
• Last year, Congress overwhelmingly passed, and President George W. Bush signed, the Fair Share Act, which closed the tax loophole that had allowed private government contractors, including Kellogg, Brown, and Root (KBR) to avoid paying almost $100 million a year in payroll taxes for its U.S. employees by setting up foreign subsidiaries. This law closed these loopholes for payroll taxes for companies applying for subsequent federal contracts.

Recommendation
• The federal government should relieve taxpayers of this unfair burden by closing the loopholes in the tax code that allow the use of offshore tax havens.
 
The impact of companies diverting profits to tax havens is real and it is both global and local in its reach. As American taxpayers face their yearly responsibility to report all of their earnings, policymakers should be reminded that there are many corporations who continue to hide theirs.

 

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