by Gabe Morgan
Originally published in The Wilmington News Journal
Since the recession, most working families in Delaware have been forced to do more with less. Yet while families experience pain at the gas pump and cuts to transportation and education, corporations are back in the black, turning record profits.
The worst problem faced by many corporations is one that no working person will ever have: finding places to hide all their excess cash. That’s a real problem for huge multinational corporations like Apple, which was recently found to have channeled $74 billion in profits to Ireland in order to avoid billions of dollars in taxes.
Nothing underscores the need for federal tax reform more than corporations struggling to find places to hide piles of cash while working people are struggling. Unpaid corporate taxes could have offered help to working people by funding roads, schools and expanding health care. That’s why it’s important to reform our tax system so that big corporations and the wealthy stop ducking their responsibilities.
Unfortunately, Apple is not alone in tax dodging. Plenty of other American companies like Boeing, Verizon and Wells Fargo have used tax loophole accounting tricks to minimize or avoid federal taxes in recent years, according to a nonpartisan research group. Delaware’s own DuPont actually managed to get refunds totaling $723 million from Uncle Sam from 2008-10, despite making more than $2.1 billion during that same period.
When corporations don’t pay taxes, it takes a toll on middle-class families who are forced to make up the difference. According to the Government Accountability Office, large, profitable corporations on average pay only one-third the official corporate income tax rate, or 12.6 percent. The percentage of federal revenue from the corporate sector is at the lowest level in 60 years, another government analysis found.
The good news is that Congress is working on reform. The bad news is that some of the ideas that have emerged from the process would only make matters worse. Some in Congress want to declare a temporary amnesty on overseas tax dodging; allowing corporations to bring their stashed cash home practically tax-free. Congress tried such a “repatriation holiday” in 2005, with the promise that if we give corporations a temporary pass, they would create jobs. Unsurprisingly, all the repatriated dollars, which were supposed to create American jobs, went instead into the pockets of top executives and wealthy shareholders.
Others are pushing for an even more drastic approach: a permanent tax amnesty. This would allow U.S. corporations to never pay another dime in taxes on profits they make offshore – or they claimed to make offshore. To many corporations, “offshore” is nothing more than the click of an accountant’s mouse or a post-office box in the Caymans. Perhaps worse than the post-office box scheme, many corporations just set up their entire operation overseas to cash in on rock-bottom tax rates, taking good jobs with them.
It doesn’t take an economist to realize corporations will exploit any and all loopholes decreasing their taxes. And sadly, most of the time they’re not even doing anything illegal. They’re simply taking advantage of a system that is broken. We need to fix our broken tax system with the right kind of reform that demands corporations and wealthy individuals give back to the nation that helped them make their fortunes.
Legislation currently proposed in Congress would close corporate tax loopholes encouraging companies to hide profits and ship jobs overseas. The Corporate Tax Fairness Act would raise nearly $590 billion of revenue to invest in our communities. While working families struggle, we cannot afford to leave $590 billion on the table.
Almost 75 percent of commercial office cleaners in Wilmington are represented by 32BJ SEIU. Our union cares about tax reform because no janitor earning $10 per hour should be shouldered with a higher tax responsibility than wealthy corporations.
When workers organize for better wages and benefits, they win when their demands are stronger than the resistance of the company. They rarely win because companies decide paying them fair wages is the right thing to do. The same rule can be applied to tax reform. Corporations will stop abusing loopholes and pay their fair share only if our leaders in Congress have the courage to make them.
Delaware’s Congressional delegation, including Sen. Carper who sits on the powerful tax-writing committee, should support tax reform that forces corporations to do the right thing for working families.