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Report: CT Loses $600M In Tax Revenue When Corporations Shift Profits

by Madeline Stocker | Jun 6, 2014 7:11am
(11) Comments | Commenting has expired
Posted to: Economics, Nonprofits, Taxes, Wall Street

Courtesy of ConnPIRG Seventy two percent of Fortune 500 companies avoid approximately $90 billion in taxes by booking profits to subsidiaries registered in offshore tax havens, according to a report from the ConnPIRG Education Fund and Citizens for Tax Justice. Each year, offshore tax loopholes used by U.S. multinational corporations cost Connecticut $600 million in state tax revenue.

These companies maintain a collective 7,827 tax haven subsidiaries, with 64 percent of the companies stashing their revenue in either Bermuda or the Cayman Islands. With profits safely holed up in territories where taxes are either not levied or eradicated, American multinationals are able to effectively sidestep their own country’s taxation system.

This year, 55 out of the 362 companies publicly disclosed the amount that they were withholding from the nation. According to the report, these companies would collectively owe $147.5 billion in additional federal taxes — the equivalent of the entire state budgets of California, Indiana and Virginia combined.

“Congress has left loopholes in our tax code that allow this tax avoidance, which forces ordinary Americans to make up the difference,” the report states. “Every dollar in taxes that corporations avoid by using tax havens must be balanced by higher taxes on individuals, cuts to public investments and public services, or increased federal debt.”

Several of the companies highlighted by the report are headquartered in Connecticut, including General Electric, United Technologies, Priceline.com and Xerox. As the second-largest offshore profit booker, General Electric holds $110 billion in 18 separate offshore tax havens. Collectively, United Technologies, Priceline and Xerox maintain $38 billion in over 82 different subsidiaries.

For Connecticut citizens, this comes at a hefty price — approximately $900 million a year, according to a previous report. Based on those numbers, the average Connecticut taxpayer will pay an annual sum of $2,537 to cover the billions of safely stashed corporate dollars. The average Connecticut small business owner will pay over three times that amount, with an annual total of $8,094 extra in taxes.

“CT taxpayers, like all taxpayers, pay a price when companies don’t pay their fair share on the federal level, because that means that we have to pay more, receive less services, go more into debt or experience any of the other problems we’re having with our budget,” ConnPIRG Director Abe Scarr said.

“The loopholes in America’s corporate tax (code) have grown so outrageous that our policymakers should be embarrassed,” Steve Wamhoff, legislative director at Citizens for Tax Justice, which studies tax policy and often criticizes corporations, said in a statement.

The report went on to claim that Congress has not thoroughly overhauled the U.S. tax code since 1986, leaving it “riddled with loopholes that corporations, families and individuals can take advantage of.”

Scarr, however, disagreed, citing citizens inability to reap the benefits of tax code loopholes as one of the more major issues.

“Regular taxpayers and small businesses can’t afford the hired army of accountants and lawyers to help them take advantage of the loopholes, and they miss out,” Scarr said.

Though reports from ConnPIRG and other like-minded organizations often portray members of the corporate profit-shifting clubs as using “complicated gimmicks” and “accounting tricks,” the American multinationals are quick to defend itself, with justifications of legality and shareholder interest at the ready.

“There’s no doubt that U.S. corporations use a variety of legal methods to reduce their corporate tax bill on their overseas operations,” the Tax Foundation said in a criticism of the report. “If we are going to reform our tax code, it is best to be informed by the best information available. This study doesn’t cut it.”

From a policy standpoint, legislation to outlaw the shifting of corporate profits seems unlikely since similar proposals have been persistently shot down by Connecticut’s Finance, Revenue, and Bonding Committee for the past twenty-odd years. However, advocates like Scarr continue to hold on to the hope that this year will see a more open-minded state legislature.

“At a time when we’re struggling to balance our budget and dealing with our deficit, closing some of these loopholes would really help Connecticut deal with it’s debt,” Scarr said.

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(11) Comments

posted by: Noteworthy | June 6, 2014  8:35am

It’s not just the U.S. tax code which is riddled with corporate tax avoidance - so is the CT tax code and this governor who insists on giving the well heeled and well connected even more largess at the expense of the normal taxpayers.

posted by: ASTANVET | June 6, 2014  10:41am

Perhaps if we didn’t have such an oppressive tax burden on Everyone from corporations to individuals, people would be more inclinded to stick around in CT.

posted by: Bulldog1 | June 6, 2014  11:23am

Perhaps if the multinational corporations paid more than zero like GE and others the “oppressive” burden on the rest of us might be lessened.  Although I suspect that the hedge fund boys and girls will still expect to pay an effective tax rate far lower than I do on my pretty ordinary income.

posted by: Joebigjoe | June 6, 2014  12:55pm

The other issue is that the government is playing the all or nothing game on this. They should negotiate this in a way that directly creates new jobs in CT. Both sides are playing cat and mouse and jobs are caught in the middle.

posted by: dano860 | June 6, 2014  1:56pm

They aren’t ‘loopholes’ they are the laws. If we, as individuals could avail ourselves of these laws we would too.
Why does there have to be 20-25,000 pages of tax code?
This is not the companies problem, if the government thinks that the companies money is theirs then they need to straighten our the code. Toss it out, making more regulations or laws will do nothing.
FLAT TAX, 15% across the board.
Oh, and get rid of the un-earned tax credit, that’s just another burden on us taxpayers.
JBJ, your right but the government doesn’t create jobs but they can chase them away.

posted by: GuilfordResident | June 6, 2014  3:25pm

I’m all for legal rules to pay less in taxes. Governments spend irresponsibly. If you like paying more in taxes, you’re welcome to pay my share.

posted by: shinningstars122 | June 7, 2014  6:56am

shinningstars122

Once again the peanut gallery misses the forest for the tree.

Guys who has lobbied Congress for decades to modify these tax codes and laws?

Who are the politicians from both parties that defend them?

Many are your conservative pro-business favorites.

It was not big bad government and honestly if ” government” wanted to continue and spend even more they never would have agree with allowing this.

How much did the state promise UT to stay in the state for 15 years?

$400 million?

They hold $38 BILLION in off shore accounts.

They hardly needed this tax break but hey they call that extortion in the criminal code.

There are probably hundreds of small to mid-size businesses that could have a used a piece of that $400 million… and to much better uses.

The bottom line is direct you anger and disgust at the worthy and deserved party…CORPORATE AMERICA.

Guys the plutocracy is clearly winning and many of you are hardly paying attention.

Just keep eating up and regurgitating David Koch’s and Grover Norquist’s narrative and all will fine.

If you define ” fine” as holding tens of billions in offshore accounts.

I highly suggest you all consider reading the book ” Winner Take All Politics”
http://www.amazon.com/Winner-Take-All-Politics-Washington-Richer-Turned/dp/1416588701

You can get it only for $0.35 too!!!

posted by: dano860 | June 7, 2014  11:10pm

SS122, it’s true, none of us have ever been hired and paid by a poor person. We do love those big and small companies.
I initially objected the tax deferment for UTC also. After giving it some thought and knowing what I know after working at P&W for 39 years they would have left one hell of a sink hole in Ct. They have so many tentacles into supporting business in this and neighboring states that the State would essentially implode. The same holds true for G.E. too. I suppose I prefer a tax deferment to handing out borrowed (bonded) cash for an existing business to move 10 miles.
The transferring of profits to offshore accounts is within the law. It may seem wrong but if the State had it in their dirty little slimy hands it would just be *issed away. The problem I see with the State is they need to be more business like and act as if they had a competitor. Without competition there is no innovation, no desire and no need to streamline and eliminate waste. Heck, the big savings from that suggestion box proved that.
Until the politicians and State employees become more business like and handle our money as if it was their own I have to support the system as it is, it suits them just fine.
Don’t get me wrong, as a proponent of continuous improvement, trained by Toyota and Shigijutsu in their Kaizen philosophy I have worked with a couple hundred groups in over 40 companies that have all taken good hard looks at themselves and always come out leaner and more efficient. The State could use a few business process events to get them moving.
Until then praise the large companies and their pay checks.

posted by: Joebigjoe | June 8, 2014  12:04pm

I must have missed this but have yet to see anyone talk about how many people supported politicians and corporations that wanted the true global economy.

Ross Perot was more right than wrong and so was Pat Buchanan. I recall people calling him an isolationist and how he would destroy this country. As I recall he wanted a fair deal for trade. The deal we have now is horrible.

I also recall him in an appearance right here in our own state talking about how we needed to slow down this global economy thing because it will cost US jobs, especially manufacturing, but he also talked about what he called tax sheltering of profits in foreign countries. He never once said we shouldnt do it because the world has changed, but we needed to go slow and see how this would impact our country as it was implemented.

Now we reap what we sow.

posted by: Greg | June 9, 2014  12:19pm

SS: You said this and i totally agree:

“Guys the plutocracy is clearly winning and many of you are hardly paying attention.”

And then you said this and lost me:

“Just keep eating up and regurgitating David Koch’s and Grover Norquist’s narrative and all will fine.”

Honestly, stop acting like this crony capitalism/corporatism doesn’t exist on the left, because it certainly well does. The last time I checked George Soros made money playing the markets. Warren “tax me more” Buffett made a killing on TARP and government largesse yet turns around and ballyhoos the tax code.  Goldman Sachs and JP Morgan give plenty of money to democrats the last time I checked.  Solyndra cost the taxpayers how?  GM- the pride of Detroit as Obama touted not long ago is now under pressure by congress for their precious cars killing people.

Stop acting like this whole plutocracy/crony capitalism idea is a right wing, conservative creation.  I’d go as far as to say at least the GOP is honest about their “corporations are people” garbage whereas the Democrats pretend to hate it publicly but play the game just as well behind the backs of the American people.

Re UTC: Keep in mind it was Malloy and his lapdogs (D) from the legislature who trumpeted this grand deal from the rooftops. 

http://www.ctnewsjunkie.com/archives/entry/senate_gives_final_approval_to_utc_tax_credit_deal/

Where were your precious Democrats rooting for the little guy in that deal?

posted by: shinningstars122 | June 10, 2014  6:17am

shinningstars122

@Dano860 I am completely dumb founded by what your wrote.

Are you suffering from Stockholm Syndrome?

I think maybe if your replaced the word plutocracy with monarchy or even aristocracy maybe you would give two squats.

Instead you just rationalize the problem in the favor of the uber wealthy.

Greg honestly extreme wealth exists in both the left and right but the biggest differences is toward paying taxes.

How many dark non-profits have been set up by right wing plutocrats to spread the narrative, that sadly many of this thread, take at face value as the purist of American truths?

Not Bill Gates. Or Buffet, NOT that I am defending this dude, at least he said they should be a high tax rate than their secretaries.

Window dressing for sure.

Wall Street backs who ever they want to win. It was just Romney in 2012.

Both Democrats and Republicans and even Teaparty folks are beholden to the campaign money and the influence…I mean racketeering that is demanded of this money..

That is where Dano860 misses the point. They run the table and to honestly accept the delusion that you tax responsibilities is even in the same ball park as GE or UTC is simple ludicrous.

Why defend these folks? I mean UTC could use some of that $38 billion on a reasonable pay increase for their employees in CT but will that ever happen?

Corporate America does not need to be coddled guys, they need a trip to the woodshed.