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NEW BRUNSWICK – As hardworking Americans file their taxes today, it’s a good time to be reminded of how ordinary taxpayers pick up the tab for loopholes in our tax laws. NJPIRG was joined today by Congressman Frank Pallone, Jr. (NJ-6), Geetha Jayaraman, owner of Grab ‘Em Snacks and member of the Main Street Alliance, and Rutgers students to release a new study which revealed that the average New Jersey taxpayer in 2013 would have to shoulder an extra $1,560 in taxes to make up for the revenue lost due to the use of offshore tax havens by corporations and wealthy individuals. New Jerseyans’ extra tax burden is the eighth highest in the nation.
“Average taxpayers and small business owners foot the bill for offshore tax dodging. Every dollar in taxes that companies avoid by booking profits to shell companies in tax havens must be balanced by cuts to public programs, higher taxes for the rest of us, or more debt,” said Peter Skopec, Program Associate at NJPIRG.
Every year, corporations and wealthy individuals avoid paying an estimated $184 billion in state and federal income taxes by using complicated accounting tricks to shift their profits to offshore tax havens. Of that $184 billion, $110 billion is avoided specifically by corporations.
“When certain individuals and large corporations abuse offshore tax havens, it is the rest of the public that has to make up the difference. Tax dodging deprives our state’s government billions of dollars in revenue each year, which means higher taxes for the average New Jerseyan or detrimental cuts to public programs,” said Congressman Pallone. “I have co-sponsored the Stop Tax Haven Abuse Act because closing offshore tax loopholes must be a priority in order to put the public before special interests and provide a level playing field for small businesses.”
In early April, the Senate Finance Committee voted to renew two especially egregious offshore loopholes which will cost $8 billion in lost revenue over the next two years.
“The Senate Finance Committee squandered an opportunity to stand with regular taxpayers who can’t marshal armies of lawyers and lobbyists to bend the tax code to their whim. Unfortunately, they caved to special interest pressure,” said Skopec.
Small businesses get stuck footing the bill for corporate tax dodging as well: NJPIRG’s report additionally found that the average New Jersey small business would have to pay $4,982 to cover the cost of offshore tax dodging by large corporations – seventh highest nationwide. Offshore tax havens give large multinationals a competitive advantage over responsible small businesses which don’t have subsidiaries in tax havens to reduce their tax bills.
“As the owner of a small company working hard and struggling towards success, I understand that I have to pay taxes,” said small business owner Jayaraman. “So why should big companies be allowed to avoid paying their share? Taxes are used to maintain and modernize our infrastructure, to educate our workforce, to provide our security – all things that big American companies benefit from, just like we do.”
The report recommends closing a number of offshore tax loopholes. Many of these reforms are included in the Stop Tax Haven Abuse Act, introduced by Sen. Levin in the Senate (S.1533) and Rep. Doggett in the House (H.R. 1554), of which Rep. Pallone is a co-sponsor.
New Jersey can also take measures to reclaim some of the revenue lost to tax havens. NJPIRG found that by passing a simple, proven reform already on the books in other states, New Jersey could generate nearly $60 million in additional state revenue annually.
Click here for a copy of “Picking up the Tab: Average Citizens and Small Businesses Pay the Price for Offshore Tax Havens.”
Click here to see an earlier study showing how states can crack down on offshore tax dodging.
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NJPIRG, the New Jersey Public Interest Research Group, is a non-profit, non-partisan public interest advocacy organization that takes on powerful interests on behalf of its members, working to win concrete results for our health and well-being.
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