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Major corporations, including Boeing, avoid a total of up to $100 billion each year in federal taxes by “off-shoring” the profits they make in the U.S. or by setting up sham headquarters in tax haven countries. As a result, Washington taxpayers are left to make up the difference.
According to “The Tax Shell Game – How Much Offshore Tax Havens Cost You in 2010," residents of Washington each paid $390 extra to make up for the taxes that are avoided by corporations such as Boeing, which earned profits of $9.7 billion from 2008 to 2010 yet paid no federal taxes during that time thanks in part to its 38 subsidiaries based in offshore tax havens. Overall, the use of offshore tax havens results in an additional tax burden of $434 for each taxpayer nationwide.
“It’s outrageous that Boeing and other major corporations can use subsidies from the state Legislature and lucrative contracts from the Federal government to make billions of dollars in profits, and yet end up paying no income tax,” said Steve Breaux, an advocate for the Washington Public Interest Research Group (WashPIRG). “The result is that the rest of us have to make up the difference. Many individuals and households end up paying more in taxes than some of the largest multinational corporations.”
Nearly two-thirds of corporations doing business in the U.S. pay no income taxes at all. Companies that received taxpayer-funded bailout money or receive lucrative government contracts and use tax havens include American Express, A.I.G, Exxon Mobil, Goldman Sachs and Pfizer.
“Main street businesses and ordinary taxpayers who can’t pay an army of accountants to devise elaborate tax avoidance schemes are forced to pick up the tab every year,” said Breaux. “It’s bad enough that we’ve already paid to bail out the banks and other big corporations – is it fair to ask us to pay their taxes as well?”
In the weeks and months leading up to Tax Day, Congress debated the national debt, rising deficits, and across the board cuts to a range of public priorities such as food safety inspectors, Pell grants, and clean air and water programs. WashPIRG today called on Congress to address the deficit by closing corporate tax loopholes, rather than cutting public priorities.
Tax loopholes present problems for state budget as well
WashPIRG’s report comes as the Legislature considers closing a variety of tax loopholes at the state level which WashPIRG and other groups, including the “Our Economic Future” coalition, say don’t deliver the economic stimulus and jobs that were promised.
“Businesses lobby for loopholes claiming the result will be a net benefit for everyone, but once the loopholes are created they’re treated as entitlements and never reviewed for their effectiveness” said Breaux. “The Legislature needs to aggressively audit these giveaways and eliminate those that don’t have hard data showing they’ve increased net revenues for the taxpayers.”
While defenders of tax loopholes claim closing them equates to a tax increase, Breaux disagrees.
“If the Legislature bought $180,000 worth of bedding materials for chickens each year and gave it away, even the most conservative members of the Legislature would call it wasteful spending,” Breaux said. “But this same wasteful spending is going on year after year in the guise of a ‘tax exemption’ for poultry farmers. I like a good roast chicken as much as the next guy, but I don’t think it should be subsidized by the taxpayers.”
According to Breaux, there are hundreds of similar tax loopholes that have escaped scrutiny, meaning a loss of revenue that should be available to balance the budget.
“The Legislature has already made cuts to programs that are devastating thousands of Washington families, worsening existing economic inequalities, and harming our economic recovery,” Breaux says. “The least they can do is address corporate welfare and wasteful government spending disguised as ‘incentives’ and ‘subsidies’ that are bleeding billions of dollars in state revenue."
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