Tax Shell Game: How Much Did Offshore Tax Havens Cost You In 2010? (US Public Interest Research Group):
Tax havens are countries with minimal or no taxes, to which U.S.-based multinational firms or individuals transfer their earnings to avoid paying taxes in the United States. Users of tax havens benefit from access to America’s markets, workforce, infrastructure and security, but pay little or nothing for it—violating the basic fairness of the tax system.
Abuse of tax havens inflicts a price on other American taxpayers, who must pay higher taxes—now or in the future—to cover the government’s revenue shortfall, or must deal with cuts in government services.
The United States loses approximately $100 billion in tax revenues every year due to corporations and individuals sending their money to offshore tax havens.
• In 2010, making up for this lost revenue cost the average U.S. tax filer $434. That’s enough money to feed a family of four for three weeks.
• The taxpayers who pick up the largest share of the tab live in Delaware and New Jersey. On average, tax filers in those states paid an additional $920 and $752, respectively.
Some of America’s biggest companies—including many who have taken advantage of government bailouts or rely on government contracts—use tax havens. As of 2008, 83 of the 100 largest publicly traded U.S. corporations maintain revenues in offshore tax haven countries.
• Goldman Sachs, which reported more than $2 billion in profit in 2008, was able to use its 29 tax haven subsidiaries to reduce its federal tax bill to just $14 million. That means that Goldman Sachs’ CEO Lloyd Blankfein, who made $42.9 million that year, earned more than three times the amount that the company paid in federal taxes.
• General Electric appears to have paid no federal income taxes in 2010, despite reporting profits in the United States of $5.1 billion. The biggest company in the country, GE has lobbied hard for tax breaks and loopholes in the federal tax code, and shifted many of its profits to tax havens to avoid paying U.S. taxes. GE employs nearly 1,000 people in its tax department to help exploit those loopholes, but has laid off one-fifth of its U.S.-based workers since 2002.
• ExxonMobil made $19 billion in profit in 2009, but paid no federal income taxes.
• Since 2007, Google has kept its effective corporate tax rate at 2.4 percent, despite mostly operating in countries with corporate tax rates of well over 20 percent. Google accomplishes this high level of tax avoidance by sending many of its earnings through Ireland, to the Netherlands, and then on to Bermuda. Using tax havens and other loopholes, Google has avoided $3.1 billion in taxes since 2007.
• As of mid-2010, technology company Cisco had yet to pay U.S. taxes on $31.6 billion of earnings that was sitting offshore.
• The airplane manufacturer and defense contractor Boeing earned profits of $9.7 billion from 2008 to 2010, yet paid no federal taxes, thanks in part to its 38 subsidiaries based in tax havens.
Ironically, firms such as Boeing that go to great lengths to avoid paying federal taxes also derive a large portion of their business from contracts with the federal government. In 2007, the Government Accountability Office calculated that, of the 100 largest publicly traded U.S. federal contractors, 63 have subsidiaries in countries with broad financial privacy laws or that are tax havens.
Contractors are not the only users of tax havens who benefit from America’s market, workforce, infrastructure and security but pay little or nothing for them—violating the basic fairness of the tax system. TransOcean, for example, the owner of the Deepwater Horizon platform that caused the Gulf oil catastrophe in 2010, was “headquartered” in the Cayman Islands from 1999 to 2008 and avoided paying many federal taxes. Yet when the oil spill occurred, TransOcean relied upon federal personnel and vessels to respond quickly to the disaster. Though the federal government subsequently billed TransOcean and other responsible parties for the cost of the cleanup, TransOcean greatly benefited from the rapid response made possible by other taxpayers who contributed their share over the years.
Citigroup took full advantage of U.S. markets and infrastructure until its business model failed and it became one of the banks most responsible for the 2008 economic collapse. During the recession, Citigroup managed to survive, thanks to a $45 billion bailout from federal taxpayers, despite the fact that the company has 427 subsidiaries located in tax havens—more than any other company in America, according to a 2008 report by the Government Accountability Office—and thus has avoided paying many federal taxes.
When corporations and wealthy individuals avoid paying taxes, ordinary taxpaying households and small businesses end up picking up the tab for the missing revenue to the U.S. Treasury—an especially galling outcome given the deep cuts being proposed to many programs that benefit ordinary Americans.