As the “fiscal cliff” came to an end in 2012 many questions were left unanswered. One of the issues that will need to be addressed with haste is the $1.2 trillion in spending cuts know as “sequestration” set to come up this month.[i] The sequester was deferred for two months so that the country would not fall off the impending fiscal cliff that would have created $109 billion in automatic spending cuts, but now the deadline is approaching once again. To reduce the $16.4 trillion dollar debt, there have been talks about cutting social security, Medicare and Medicaid programs. The better answer to the sequestration and the US debt is to raise lost revenue through corporations’ use of tax loopholes and tax havens.
Senator Carl Levin (D-MI) and Senator Sheldon Whitehouse (D-RI) introduced the Cut Unjustified Tax Loopholes Act (CUT Loopholes Act) yesterday as an answer to the sequestration problem and the tax loophole problem. Corporate profits are at an all-time high of over $1.75 trillion in the third quarter of 2011, but corporate revenues are near an all-time low as percentage of federal revenues, down from about 40% to 10%. While the top nominal corporate tax rate is 35%, the reality is that U.S. corporations pay an average of less than 15%.[ii]
More than $150 billion dollars that could be used to reduce the country’s debt is being lost through corporations’ use of tax havens.[iii] At least 83 out of the top 100 publicly traded companies like GE, Google, Goldman Sachs and dozens of others have created hundreds of phantom entities with nothing more than a clever tax attorney and P.O. Box.[iv] It is estimated that the US loses out on $70- $100 billion per year due to these corporations use of tax loopholes and tax havens.[v] This is not illegal, but it is not right. When these rich corporations use gimmicks to avoid paying their fair share of taxes, ordinary citizens carry the debt. The CUT Loopholes Act will stand up for the everyday American, make sure that large corporations pay their fair share of the tax burden and send a message worldwide that this corporate tax dodging should not be tolerated.
“Every year, some of the most profitable corporations use a long list of loopholes to avoid paying taxes. With the sequestration is right around the corner, the CUT Loopholes Act will cut the loopholes and generate billions of dollars to avoid the next cliff. Further, this legislation sends a global message that corporate tax dodging should not be tolerated in any corner of the world,” said Eric LeCompte, Jubilee USA Network Executive Director.
[i] Congressional Budget Office. http://www.cbo.gov/latest/Budget/Sequestration-Reports
[ii]Brown Brothers Harriman, “BBH Fixed Income Quarterly. http://www.bbh.com/wps/wcm/connect/1f344c0048e59069b50efd2565912078/BBH+Fixed+Income+Quarterly+1st+Quarter+2013.pdf?MOD=AJPERES&CACHEID=1f344c0048e59069b50efd2565912078 and “Financial Accountability and Corporate Transparency Campaign”, FACT Coalition. http://tjn-usa.org/current-campaigns
[iii] “FACT Sheet: Tax Abuse by the Numbers”, FACT Coalition.
[iv] U.S. PIRG, “Loopholes Cost Taxpayers $100 Billion Last Year”. http://www.uspirg.org/issues/usp/close-corporate-tax-loopholes
[v]U.S. PIRG, “Close Corporate Tax Loopholes”. http://www.uspirg.org/issues/usp/close-corporate-tax-loopholes