Rather than allow income that has been shifted out of sight from federal tax authorities to diminish the tax baseline, states can close loopholes that restore this hidden income. Decoupling would help prevent those automatic losses. States can “decouple” their tax system from the federal tax system. Because states typically use the same definitions of income as those in the federal tax code, they automatically lose money when tax haven users don’t report income to the federal government.States can act immediately to restore fairness to the tax system and minimize the fiscal impact of offshore tax haven abuse through policy changes that will close loopholes and increase their ability to detect and penalize tax avoidance.
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]įederal policymakers must crack down on tax haven abuse, but with Congress often gridlocked, states should act independently to reduce the impact of offshore tax havens on state budgets. At the end of 2011, 290 of the top Fortune 500 companies using tax havens collectively held $1.6 trillion in profits outside the United States-up from $1.1 trillion in 2009-according to Citizens for Tax Justice.As of 2008, 83 of the 100 largest publically traded corporations in the United States maintained revenues in offshore tax havens, according to the Government Accountability Office. Some of the largest companies in the United States use tax havens, including many that have taken advantage of government bailouts or rely on government contracts.Table ES-1 lists the top 10 states with the most revenue lost to tax haven abuse.This sum is also roughly equivalent to total state and local expenditures on firefighters ($39.7 billion) or on parks and recreation ($40.6 billion) in FY 2008.$39.8 billion would cover education costs for more than 3.7 million children for one year.In 2011, states lost approximately $39.8 billion in tax revenues from corporations and wealthy individuals who sheltered money in foreign tax havens. Multinational corporations account for more than $26 billion of the lost tax revenue, and wealthy individuals account for the rest. Tax havens deprive state governments of billions of dollars in badly needed revenues as well. Based how much income is federally reported in each state, and on state tax rates, it is possible to calculate how much each of the state governments lose as a result of offshore tax dodging. income tax liability – costing the federal government $150 billion in lost revenues each year.įederal taxpayers are not the only victims of offshore tax havens.
Corporations and individuals shift earnings to financial institutions in these countries to reduce their U.S. Tax havens are countries or jurisdictions with minimal or no taxes. Ultimately, taxpayers must pick up the tab, either in the form of higher taxes, cuts to public spending priorities, or increased national debt. Tax haven abusers benefit from our markets, infrastructure, educated workforce, and security, but they pay next to nothing for these benefits.
corporations and wealthy individuals use offshore tax havens to avoid paying taxes to the federal government, it is an abuse of our tax system.
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