Offshore Tax Dodging Blows a $40 Billion Hole in State Budgets, $150 Billion Nationally

New WashPIRG Study Exposes the Real Cost of Tax Loopholes for Washington Residents

WashPIRG Foundation

WashPIRG – joined by Barabara Elza, owner of Seattle’s Daily Dozen Doughnut – released a new study revealing the real cost of offshore tax loopholes. This tax avoidance costs the federal government $150 billion in tax revenue every year. States lost $39.8 billion due to offshore tax dodging in 2012.  Many of America’s wealthiest individuals and largest corporations use tax loopholes to shift profits made in America to offshore tax havens, where they pay little to no taxes.

“Tax dodging is not a victimless offense. When corporations skirt taxes, the public is stuck with the tab. Washington should be using that money to benefit the public,” said Micaela Preskill, Advocate for WashPIRG.

Nationally, offshore tax loopholes cost federal taxpayers $150 billion each year. This is enough money to provide Pell Grants for ten million college students every year for four years. Or provide a tax cut of $1,068 for every person who filed taxes in America.

Across the country, states lose almost $40 billion, which roughly equals the total amount spent by all state and local governments on firefighters in 2008. It’s also enough money to cover the educational costs for 3.7 million children for one full year.

Although Washington does not have a corporate tax and therefore does not lose state revenue from offshore tax dodging, Washington taxpayers and small business owners still have to pick up the tab when corporations avoid their federal taxes through tax haven abuse.

A previous U.S. PIRG report found that the average federal taxpayer in Washington would have to shoulder an extra $360 tax burden to make up for revenue lost from corporations and wealthy individuals shifting income to offshore tax havens.

Small businesses are hit especially hard by corporate tax dodging. The report additionally found that to cover the cost of the corporate abuse of tax havens in 2011, small businesses in Washington would have to foot a bill of over $2,082 on average.

“All of the business owners I know are having trouble right now. And large corporations making a lot in profit every year are not paying their taxes. It doesn’t make sense!” said Barbara Elza, owner of Seattle’s Daily Dozen Doughnut.

As of 2008, at least 83 of the top 100 publicly traded corporations in the U.S. used tax havens, according to the Government Accountability Office. At the end of 2011, 290 of the top Fortune 500 companies reported that they collectively held a staggering $1.6 trillion offshore. By using offshore tax havens, corporations and wealthy individuals shift the tax burden to ordinary Americans, forcing us to make up the difference through cutting public services, growing our already big deficit, or raising taxes on everyday citizens.

“Some budget decisions are tough, but closing the offshore tax loopholes that let large companies shift their tax burden to the rest of us is a no-brainer,” Preskill added.

Here are some increasingly notorious ways that some of America’s largest corporations drastically shrink their tax bill:

•    Boeing earned $4.3 billion in 2010 but paid only $13 million in federal taxes for a whopping 0.3 percent income tax rate, thanks in part to its 42 subsidiaries based in tax havens.
•    Google used accounting techniques nicknamed the “double Irish” and the “Dutch sandwich,” which involved two Irish subsidiaries and one in Bermuda, to help shrink its tax bill by $3.1 billion from 2008 to 2010.
•    Wells Fargo paid no federal income taxes in 2008, 2009, and 2010, despite being profitable all three years, largely due to its use of 58 offshore tax haven subsidiaries.
•    Microsoft avoided $4.5 billion in federal income taxes over three years by using sophisticated accounting tricks to artificially shift its income to tax-friendly Puerto Rico. The company pays its Puerto Rican subsidiary 47% of the revenue generated from its American sales, despite the fact that those products were developed and sold in the U.S.