Head Smacker: Congress Allows Overseas Tax Havens to Dodge $90 Billion a Year
When a five-story office building in the Cayman Islands is the official address of 18,857 companies, it’s a pretty good hint that something fishy is going on. The Cayman Islands has no income tax on businesses incorporated there. Offshore Shell Games, a new report by Citizens for Tax Justice and the U.S. PIRG Education Fund, shows how corporations set up subsidiaries in the Caymans, Bermuda, and other low/no tax places in order to hide the fact that substantial profits are really being generated in the U.S. Second hint of fishiness: the profits supposedly made by American multinational corporations in the Cayman Islands and Bermuda were at least 1,600 times the entire economies of each of those two countries.
Nearly three-quarters of Fortune 500 corporations have set up subsidiaries in offshore tax havens – nations with little or no taxes. By claiming they are operating in places like Bermuda or the Cayman Islands, multinational corporations avoid paying U.S. taxes. But the report cites evidence that much of the corporate profits supposedly offshore are really in U.S. banks or other assets.
What does this have to do with unemployment insurance? Why, it’s the double standard, a major source of head-smacking. Congress has been willing to deepen the deficit by $90 billion a year by foregoing taxes from corporations because of crater-sized loopholes. But it has not been willing to extend Emergency Unemployment Compensation for the long-term jobless without paying for it by cutting something else. At least that’s the excuse the House leadership gave, but when the Senate sent them a bill extending unemployment compensation for five months and paying for it, they still refused to take it up.
Providing unemployment benefits not only helps workers and their families; it also spurs economic growth, benefiting us all. The Congressional Budget Office estimated last year that if Emergency Unemployment Compensation were extended during 2014, it would have increased economic output by 0.2 percent, and increased the number of jobs by at least 200,000. Corporate tax breaks in general are not particularly effective at promoting growth, and loopholes that provide incentives for moving money out of the country are not going to do much besides enriching the corporations exploiting them. So there you have it: Congress is choosing to green light corporate tax avoidance schemes while slamming the brakes on help for the long-term jobless. It’s the wrong choice.