For the sake of American taxpayers, companies must pay their fair share
When my father-in-law died, he left $10,000 to the U.S. government in his will. When people asked why he was leaving money to the government, he said it was because he was grateful to live in America. He never resented or tried to avoid paying his taxes, and most Americans feel the same way. They’re willing to pay for their share of the cost to attend public school, drive on safe highways, support our military, protect our environment, and enjoy the other services that a good government offers to a civil society.
Where that willingness breaks down — and where it desperately needs fixing — is when corporations and wealthy individuals use gimmicks and tax loopholes to dodge paying their fair share, or, in some cases, to pay no taxes at all. That is an affront to hard-working, average Americans who need Congress to level the playing field. In fact, when Americans were asked in 2014 how best to strengthen our economy, the number one response was “ask the wealthy and corporations to pay their fair share.”
That’s not happening now. Each year, corporations and wealthy taxpayers can employ an army of accountants, lawyers and bankers to do what working families and small businesses can’t afford to do: set up shell corporations, questionable trusts, and convoluted schemes in offshore tax havens that have little to no taxes and strict secrecy laws. In this way, profitable corporations can declare billions of earnings in tax havens even when they have no real business operations there.
U.S. companies like Apple, Microsoft, Walmart, and Caterpillar stash tens of billions of dollars offshore that by rights should be taxed right here at home where the income was produced or created. American firms now hold an incredible $2.5 trillion overseas, according to a Citizens for Tax Justice report, and have so far avoided paying U.S. taxes totaling an estimated $765 billion.
Wealthy individuals, too, can hide their income behind corporations formed or banked in secrecy jurisdictions. It’s not a coincidence that Delaware is home to more corporations than people. One building alone is the legal address of nearly 300,000 businesses, likely in part because Delaware is notorious for welcoming corporations with hidden owners, no questions asked. Many states do the same. And hidden ownership is a useful tool for tax dodging.
This tax dodging by corporations and wealthy individuals denies American families and communities resources they desperately need. The water crisis in Flint, Michigan, is a tragic example of public services grown dangerous from lack of investment. All across America, pipes deliver toxic water, roads crumble, bridges sag. It’s a sham and a shame, and Congress can take steps now to stop it.
Congress can start by immediately closing the unjustified tax loopholes whose only purpose is tax avoidance, in particular, those used by multinational corporations to transfer their earnings away from the United States — where they would and should be taxed — to the Cayman Islands, Ireland, Luxembourg, and other tax havens.
Congress can also pass the bipartisan Incorporation Transparency and Law Enforcement Assistance Act that will require states to collect the true names of all corporation owners and disclose that information to law enforcement when needed.
While it’s unclear whether Washington can achieve comprehensive tax reform, Congress can and should act immediately to close unjustified and costly tax loopholes, eliminate tax incentives to shift and keep corporate profits offshore, and cut off access to offshore tax havens to both corporations and wealthy individuals.
The United States has provided the freedom and opportunity for multinational corporations and individuals to attain tremendous wealth. These beneficiaries of America’s success have a responsibility to pay their fair share of taxes on Tax Day and every day, rather than shift the burden onto middle class Americans. For the sake of all the honest, hardworking taxpayers in this great country, it’s time for Congress to act.
Carl Levin served as U.S. Senator from Michigan from 1979 to 2015. He currently serves as a professor of law and chairman of the Levin Center at Wayne State University Law School in Detroit, Michigan.
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