Offshore Tax Havens Cost Average Michigan Taxpayers $310 a Year, Each Michigan Small Business $1,561, New Study Finds

PIRGIM

ANN ARBOR – With tax day approaching, a new study released by PIRGIM found that the average Michigan taxpayer in 2011 would have to shoulder an extra $310 tax burden make up for revenue lost from corporations and wealthy individuals shifting income to offshore tax havens. The report additionally found that to cover the cost of corporate abuse of tax havens in 2011, small businesses in Michigan would have to foot a bill of $1,561 on average.

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 publically traded corporations use offshore tax havens.

“When corporations shirk their tax burden by using accounting gimmicks to stash profits legitimately made in the U.S. in offshore tax havens like the Caymans, the rest of us must pick up the tab,” said Meghan Hess, PIRGIM program associate. “Responsible small businesses don’t just foot the bill for corporate tax dodging, they are put at a competitive disadvantage since they can’t hire armies of well paid lawyers and accountants to use offshore tax loopholes.”

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). Senator Carl Levin is the chief sponsor of the bill in the Senate, and five Michigan representatives are cosponsoring the House version.

Among the House cosponsors is Representative Gary Peters (MI-9), who said, “Michigan’s working families and small businesses already pay their fair share in taxes, and they deserve a more fair tax code. It’s estimated that corporations and the wealthiest Americans avoid paying $100 billion per year by exploiting offshore tax shelters and it’s time to close these loopholes. With millions of Americans paying their taxes this week, I’m committed to continuing the fight for tax policies that put middle-class and working Americans first.”

Using complex tax avoidance schemes, many of America’s largest corporations drastically shrink their tax bill:

·         Google uses techniques nicknamed the “double Irish” and the “Dutch sandwich,” involving two Irish subsidiaries and one in Bermuda – a tax haven – that helped shrink its tax bill by $3.1 billion between 2008 and 2010.

·         Wells Fargo paid no federal income taxes between 2008 and 2010 despite being profitable all three years in part due to its use of 58 offshore tax haven subsidiaries.

·         G.E. received a $3.3 billion profit in 2010 despite reporting over $5 billion in U.S. profits to shareholders. The company has $94 billion parked offshore and uses 14 tax haven subsidiaries.

“It is appalling that these companies get out of paying for the nation’s infrastructure, education system, security, and large market that help make them successful,” added Hess.

Click here for a copy of “Picking up the Tab: Average Citizens and Small Businesses Pay the Price for Offshore Tax Havens.”

Click here to see an earlier study showing 30 companies that paid more in campaign contributions and lobbying expenses than they did in federal income taxes.

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PIRGIM, the Public Interest Research Group in Michigan, 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.

www.pirgim.org