When a company like General Electric pays little or no U.S. income taxes, it has troubling implications for domestic business and our entire society.
As a businessman and entrepreneur, I believe it is myopic tax policy to force domestic enterprises to compete on an unlevel playing field against companies that use offshore tax havens to relocate profits.
Our current upside down corporate tax system means that a U.S. manufacturer, insurance company, retailer, or technology firm must compete against another company based not on product quality and services, but on accounting gymnastics.Many multinational companies use a gimmick called transfer pricing, to represent that they’ve earned their profits at a subsidiary in an offshore tax haven nation like the Cayman Islands or Luxembourg, even though 99 percent of their operations and sales are not there.
This accounting game enables these shell subsidiaries to pay little or no corporate income tax, while the U.S. parent company represents to the IRS that they’ve lost money on their U.S. operations. A recent estimate of revenue lost due to this tax dodging dance is $90 billion a year, an amount approaching the total budget gaps of all U.S. states combined.
This is only one example of the exotic loopholes that U.S. multinational corporations utilize that put domestic employers at an unfair disadvantage.
It is simply wrong that a U.S.-based multinational company is able to report profits to their shareholders and losses to Uncle Sam.
When General Electric or Boeing or Phizer deploy armies of accountants to game their tax bill down, it simply means the rest of us are left responsible for the bill.
And now, a coalition of global corporations is calling for a tax holiday so they can bring home over $1 trillion profits that they parked offshore without paying the same corporate income rate that most domestic companies pay. Congress’ Joint Committee on Taxation estimates this move would cost the U.S. $80 billion over 10 years.
Aggressive tax avoidance raises the question of what kind of country we want to have and who is going to pay for it.
To make our views public, hundreds of business owners and CEOs like me have signed a statement calling for the end of tax haven abuse. We welcome other business people and investors to sign at the website,www.businessagainsttaxhavens.org. There are millions of U.S. business people in this country who work extremely hard to reach customers, provide better services, build better widgets — and pay their local, state and federal taxes. When times are lean, we don’t look to our accountant to bring home the bacon.
Paying our fair share of business taxes is the price we pay not only to live in a civilized society, but also a reasonable levy to conduct business in a vibrant, regulated marketplace with property rights protections, public infrastructure, and the rule of law.
If companies like General Electric want to enjoy the fruits of this taxpayer funded business environment, then they should end their aggressive tax avoidance and take responsibility for paying their fair share.
The bills have to be paid — and no one should be able to opt out simply because they are politically connected and big. It undermines the entire system of government and is reprehensible that some corporations pay nothing toward the range of public goods that includes Centers for Disease Control, homeless shelters, and schools for our kids.
As a business owner and as an individual, I never resented paying taxes, as long as we had a relatively level playing field. The price we pay is not excessive.
In the 1970s, I paid a much higher percentage of my income than I do today. Even compared to President Reagan’s 1980 tax reform, the effective rate of my personal income taxes is dramatically less today. At the same time, the share of U.S. taxes paid by corporations is at an historical low because of subsidies, loopholes and other tax avoidance strategies.
Congress should not allow a tax holiday for offshore tax dodgers and instead should pass legislation like the Stop Tax Haven Abuse law that would be a huge step toward leveling the corporate tax playing field.
Egerman is a successful entrepreneur, based in Boston, who has started two health information technology companies, including eScription.