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Multinational Shell Game Hurts Local Business
Tax havens create a fundamentally unlevel playing field between multinational corporations with overseas tax havens and local Main Street businesses.
As a small business owner, I pay my taxes and give charitable contributions to ensure that my community is a healthy and vibrant place. My company is dedicated to making technology, communications, and the Internet in line with federal disability laws and accessible to everyone--including wounded veterans and people with all types of disabilities. The success of my business is tied to my community's health.
So I was troubled to realize, thanks in part to overseas tax havens, that we have one tax system for multinational companies and another for small businesses and ordinary taxpayers.
Tax havens enable American multinationals to shift income and assets between global subsidiaries in order to dodge taxes. They pretend their profits are earned at their subsidiary in a low-tax haven country, such as the Grand Cayman Islands, and their losses generated in Hometown, USA, so they pay little or no taxes.
Business and Investors Against Tax Haven Abuse, a new coalition pressing for change, estimates that U.S. multinationals avoid at least $37 billion a year thanks to tax havens. Responsible Main Street businesses and individual taxpayers are left to pay the tax bills for defense, schools, roads, and other infrastructure investments vital to our quality of life.
Tax havens create a fundamentally unlevel playing field between multinational corporations with overseas tax havens and local Main Street businesses. U.S. small businesses (firms with less than $10 million in annual revenues) pay an effective tax rate of 19.8 percent in federal taxes, according to a 2009 report by the Small Business Administration.
Meanwhile, many multinationals are paying considerably less. In 2008 Goldman Sachs, with 29 subsidiaries located in offshore tax havens, reported profits of over $2 billion. They paid federal taxes of $14 million, an effective tax rate of just 1 percent-- less than a third of what they paid their CEO Lloyd Blankfein ($42.9 million).
I don't mind competing with the big boys. I have my advantages too. I'm anchored in my community and accountable to my customers. I can make decisions about my business without having my chain yanked by someone in New York City or Bentonville.
My main concern is the way this unlevel playing field reflect the disparity of power between the huge lobbying clout of multinational companies and the concerns of Main Street business and ordinary citizens.
For example, in recent years the U.S. Chamber of Commerce has stopped representing my interests. They're a different creature than my local chamber of commerce and other business associations, like the U.S. Business Leadership Network and the National Association of Women Business Owners.
The U.S. Chamber today represents 300 huge global companies, the same companies that hire teams of lawyers and accountants to find or create tax loopholes. Avoiding taxes is central to their business model, and the Chamber sides with them against the rest of us.
These global conglomerates can't compete with me on customer service or who can build a better widget, so they have to use their political power to create some other advantage. According to The Washington Post, the Chamber spent $150 million in direct lobbying funds in the last year--$3 million a week--to block health-care reform and financial reform, and to protect tax loopholes such as overseas tax havens.
More than 65 percent of all new jobs come from the small business sector. We're part of a new economy rooted in our local communities, creating real goods and services. We're not playing shell games with our taxes.
As a nation we can keep subsidizing global companies that outsource jobs and aggressively avoid taxes, or we can bolster the homegrown business sector. We better decide soon before the rest of Main Street vanishes.