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JERSEY CITY – NJPIRG, New Jersey Citizen Action, and the New Jersey Main Street Alliance came together at a Jersey City small business today to discuss a new NJPIRG study revealing that New Jersey lost $2.8 billion in state revenue due to offshore tax dodging in 2012.
Many of America’s wealthiest individuals and largest corporations, including Honeywell and Johnson & Johnson in New Jersey, use tax loopholes to shift profits made in America to offshore tax havens, where they pay little to no taxes. NJPIRG’s report includes a ranking of states based on state revenue lost to offshore tax havens. Only two other states lost more than New Jersey to offshore tax avoidance last year.
“Tax dodging is not a victimless offense. When corporations skirt taxes, the public is stuck with the tab. And since offshore tax dodgers avoid both state and federal taxes, they hurt everyday taxpayers twice,” according to Peter Skopec, Program Associate at NJPIRG. “New Jersey should be using that money to benefit the public.”
All told, state taxpayers across the country lost nearly $40 billion last year from offshore tax loophole abuse. The $2.8 billion lost in New Jersey is more than enough to pay for the combined cost of repairing Hurricane Sandy’s damage to New Jersey’s gas and electric utilities systems, to fix storm damage to NJ Transit’s equipment, rail cars and locomotives, and to make up for the projected drop in state revenue caused by Sandy.
“Small and mid-size business owners like us have to pay their taxes – so why should companies like Microsoft, Google or Johnson & Johnson be allowed to avoid paying their share?” asked Phillip Stamborski, owner of Gallerie Hudson Framing and a member of the New Jersey Main Street Alliance. “Everyone needs to do their part to keep our state and our country moving forward.”
“Small business owners know that to build vibrant local economies we have to invest in education, invest in infrastructure, and invest in a healthy customer base,” said Corinne Horowitz, with the New Jersey Main Street Alliance & New Jersey Citizen Action. “When big corporations use tax havens to avoid paying their fair share, they’re starving our state of the resources we need to invest in our local economies and invest in our future.”
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 national level, offshore tax loopholes cost federal taxpayers $150 billion each year.
“We give away billions in revenue to stupendously profitable corporations through tax breaks and loopholes – and we wonder why our state is crumbling around us,” said Kelly Conklin, owner of Foley Waite Associates, an architectural woodworking business based in Bloomfield. “We all have to start pulling our weight.”
THE HIDDEN COST OF OFFSHORE TAX HAVENS: REPORT HIGHLIGHTS
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 by cutting public services, by growing our already big deficit, or by raising taxes on ordinary citizens.
State taxpayers across the country lost nearly $40 billion last year from offshore tax loophole abuse. At the national level, offshore tax loopholes cost federal taxpayers $150 billion each year, which would be more than enough to cover the scheduled “sequester” spending cuts that are set to take effect in just a few weeks.
Here are some increasingly notorious ways that some of America’s largest corporations drastically shrink their tax bill:
- Google uses accounting techniques nicknamed the “Double Irish” and the “Dutch Sandwich,” which involved two Irish subsidiaries and one in Bermuda, to help shrink the company’s tax bill by $3.1 billion from 2008 to 2010.
- On aggregate, 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 income to tax-friendly Puerto Rico. The company pays its Puerto Rican subsidiary 47% of the revenue generated from American sales, despite the fact that those products were developed and sold in the U.S.
States should not wait for federal action to curb tax haven abuse. NJPIRG’s study proposes several policy solutions that states should explore right away, including:
- Decoupling state tax systems from the federal tax system;
- Requiring worldwide combined reporting for multinational corporations;
- Requiring increased disclosure of financial information; and
- Withholding state taxes as part of federal FATCA (Foreign Account Tax Compliance Act) withholding.
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The New Jersey Public Interest Research Group (NJPIRG) Law & Policy Center, a 501 (c) (3) organization, conducts research and public education on behalf of New Jersey consumers and the public interest. We investigate problems, craft solutions, educate the public, and offer meaningful opportunities for civic participation. http://www.njpirgcenter.org
The New Jersey Main Street Alliance is a statewide network of local, independent small business owners across New Jersey. NJ-MSA, a project on New Jersey Citizen Action, creates opportunities for small business owners to speak for themselves on issues that impact their businesses and local economies. nj.mainstreetalliance.org
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