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Free enterprise is not free

by PRIDE Newsdesk

Nicole Tichon

There’s been a lot of talk about what we can’t afford as a nation and who is getting what ‘gift’ or which free ride. When President Obama recently met with CEOs and chatted with Jamie Dimon, we should hope he issued a stern warning that legal tax avoidance games played by banks and multinational corporations are on the chopping block. After all, free enterprise isn’t free.

In the coming weeks there will be pivotal conversations about how and where to tax corporations and how to reform our corporate tax system. Don’t believe the hype that these issues are too complicated. They’re not. If you paid more than 1.9% in income tax, you paid a higher rate than Apple. Period.

Both political parties need to combat the damaging effects of the off shoring of jobs and revenues. Our current system drains our Treasury and threatens basic services and national security.

Citizens get it. According to a new poll by Hart Research, “84% of voters approve of increasing taxes on the profits American corporations make overseas, to ensure that they pay the same taxes on those as they do on domestic profits.”

These issues were put on the national stage because of a presidential candidate who uses offshore accounts, and by the reporting of tax shell games by Apple, Google, Starbucks, Microsoft and General Electric. Now, in the U.K., Amazon, Starbucks and Google are being questioned by the government for shady tax practices.

The Obama administration and Congress need to correct a flawed system that has fostered legal tax avoidance and raised the ire of progressives and conservatives alike.

Who can defend companies making record profits skipping out on their tax bills? Who can honestly keep holding up the disingenuous argument that multinational corporations in the U.S. pay the highest rate in the world when the fact is, it just ain’t so? Consider: According to the Congressional Budget Office, the average tax rate corporations pay on domestic profits in the U.S. is about 12%.

Moving forward, we’ll hear lofty-sounding ideas about broadening the base, lowering the rates, closing loopholes, and more technical ideas about moving to a territorial system of taxation.

Let’s start with the former: The loopholes that need to be closed are those that enable corporations to pay extraordinarily low tax rates or no tax at all by shifting profits, patents and headquarters offshore. These cost us $100 billion per year.

With respect to the latter, lawmakers are in danger of making a bad situation worse. A territorial system would be tantamount to a permanent tax holiday for corporations. Under this system, companies would not have to pay U.S. federal income taxes on foreign earnings when they bring the profits back to the United States. These ‘foreign’ earnings include the money that companies such as Google pay themselves for their own products or patents conveniently parked offshore.

Powerful special interests and CEOs have already lined up money, lobbyists and their media machine to lull lawmakers and citizens into believing they’re the grownups at the table and know what’s best. They don’t. Instead, they benefit from a system rigged for their interests. And now they want more, at your expense.

Decisions made about taxation will have long-term and profound effects. It’s not fair to continue to ask taxpayers to sacrifice, while failing to collect existing tax revenue from corporations making record profits.

Free enterprise isn’t free. The nation’s budget situation may be reason enough to close these loopholes, but the ramifications go much further. American corporations that benefit from the work force, infrastructure, courts, markets and national security of the United States shouldn’t be allowed to avoid their responsibilities.

Former U.S.-based corporations that have benefited from U.S. government research and development dollars and do the majority of their business in the U.S. should not be allowed to simply call a post office box in the Cayman Islands or an empty law office in Switzerland their ‘headquarters.’

Congress needs to close offshore tax-dodging loopholes and make large corporations pay taxes in the same country that provides them with the benefits and legal protections that make it profitable to operate in the United States in the first place.

Nicole Tichon is executive director of Tax Justice Network USA and director of the Financial Accountability and Corporate Transparency coalition.

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