TAX EXTENDERS COST BILLIONS by Deborah Field, May 31,2014 www.oregonlive.com
Fifteen years as an accountant in corporate America taught me that big multinational companies think they can play by their own rules. That's especially true when it comes to taxes: Some corporations take pride in paying close to nothing in federal income taxes. Now that I run my own small printing and stationery businesses, I'm paying my fair share along with the rest of the middle class.
Too many big companies avoid taxes by lobbying Congress to riddle the law with loopholes. Some lawmakers aid their efforts - then complain that the law has holes like Swiss cheese. How big are those loopholes? Large enough that 26 large, profitable U.S. corporations paid absolutely nothing in federal income taxes from 2008 to 2012, according to the watchdog organization Citizens for Tax Justice. Verizon, Boeing and General Electric combined paid less in federal income taxes over five years than your family or my small business paid in taxes in one year. There is something deeply wrong with that.
I'm proud to pay my fair share of taxes. Most of us realize that it's the price of sustaining our public infrastructure, schools, legal system and other things essential to making America an excellent place to do business. Corporations that take advantage of all America has to offer and then refuse to pay their fair share in taxes are shirking their civic responsibilities.
Small businesses like mine don't have bank accounts in the Cayman Islands. But big corporations use offshore tax havens to dodge billions of dollars in taxes every year. When big corporations use tax havens to avoid paying taxes, the rest of us end up paying more. Oregon taxpayers will have to pay $1,022 this year on average to make up for the combined losses in federal and state tax revenues from tax havens, according to a report by U.S. PIRG. Oregon small businesses will have to pay $3,125 on average.
The good news is some of the loopholes that enable large corporations to hide their profits offshore recently expired. The bad news is Congress is on course to bring them back.
One of the expired tax loopholes, known as the "active financing exception," enables banks and other companies with financing operations to make it appear that U.S. profits were earned in offshore tax havens. General Electric depends on this loophole to lower its tax bill, and so has put four dozen lobbyists working to keep it alive, according to a recent study by Americans for Tax Fairness and Public Campaign.
Thanks to the "GE Loophole" and other tax dodging tricks, GE hasn't paid a dime in federal income taxes over the last five years even though it's made $27 billion in profits. Instead, it's gotten $3 billion in refunds.
The GE Loophole isn't just unfair to small businesses; it's a burden to us all. If the loophole is renewed, it will cost $62 billion over the next decade. That's money we won't have to fix roads, build schools, or find medical cures—the kinds of investments that strengthen our communities and boost small business.
Even in Washington, expired corporate tax breaks wouldn't stand much of a chance of being renewed through stand-alone legislation. But they've been cleverly bundled with scores of other tax changes that mostly benefit businesses into an innocuous sounding package known inside the Beltway as "tax extenders." The total cost is $86 billion for two years, but none of it is paid for meaning it will get added to the budget deficit.
The U.S. Senate is scheduled to vote on this measure soon. Oregon Sen. Ron Wyden, the bill's chief sponsor, recently declared this would be the "last extenders bill on my watch." It should be the last package of corporate tax giveaways, period.
When the recession hit in late 2008, our sales suddenly fell 50 percent. My customers didn't have as much money to spend on our products. We had to lay off most of our staff. Those are the kind of problems small businesses have to face and overcome. They can't be fixed by sweetheart deals for large corporations like the GE Loophole.
Congress should let corporate America know it has to play by the same rules as everybody else. Let's end tax breaks that favor giant corporations and focus on supporting our small businesses in local communities and their customers.
Deborah Field co-owns Paperjam Press in Portland and serves on the executive committee of the Main Street Alliance of Oregon, a coalition of over 2,200 small business owners.