| | Advanced Search

 

State Report: Marijuana Tax + Bill Targets Prostitutes and Pimps—Plus increased sentences for gang crimes

John Rooke - Thinking Out Loud—JR's column on the sports stories and personalities…

RI Beauty Insider: Pedi Nation – Get the Best Pedicure Ever—A guide to finding a pristine pedi place

Fit for Life: Fail to Plan? Plan to Fail—Plan and prioritize, and you will prevail

Arthur Schaper: Grand Theft Auto Cicilline—MINDSETTER Arthur Schaper examine's Cicilline's role in Prov's…

Five Live Music Musts – April 18, 2014—Great vibes await

Report: Preston Murphy Leaving URI for Boston College—Preston Murphy Leaves URI for Boston College

EXCLUSIVE: Bryant Tells Grads No Selfies with President at Grad—Prohibiting selfies?

PC Athletics gets high marks—Friar winter sports #1 among Big East schools...

NEW: Providence’s Al Forno Featured as a Best Pizza Spot in the US—Another accolade for Al Forno

 
 

Tax Dodging Costs RI $229 Million Annually

Wednesday, February 06, 2013

 

A report issued this week by the Rhode Island Public Interest Research Group says the state is losing hundreds of millions of dollars annually because of offshore tax loopholes.

Nearly every city and town in Rhode Island continues to struggle with the effects of the state’s economic downturn and, at a time when budgets are stretched to the max and municipalities are trying to squeeze as many dollars as possible from state and federal aid, a new report says one unchecked problem is costing RI $229 million annually.

According to the Rhode Island Public Interest Research Group (RIPIRG), Offshore Tax Havens—or countries/jurisdictions with minimal or no taxes—are taking approximately $164 million dollars in corporate income tax revenue and $65 million dollars in individual tax revenue out of Rhode Island on a yearly basis.

The losses are part of a larger problem nationwide that the RIPIRG says includes 83 of the 100 largest publically-traded corporations in the country and 290 of the top Fortune 500 companies overall.

“Tax dodging is not a victimless offense,” said Ryan Pierannunzi, a Tax and Budget Associate for RIPIRG. “When corporations skirt taxes, the public is stuck with the tab. And since offshore tax dodgers avoid both state and federal taxes, they hurt everyday taxpayers twice. Rhode Island should be using that money to benefit the public.”

A Nationwide Issue

Corporate tax avoidance was a topic of much discussion during last fall’s Presidential Campaign but the true and specific impact it has on the country has often gone unreported.

According to RIPIRG, state taxpayers across the country lost nearly $40 billion last year from abuse related to offshore tax loopholes.

“To put that amount in context, $40 billion roughly equals the total amount spent by all state and local governments on firefighters in 2008,” the report said. “It’s also enough money to cover the educational costs for 3.7 million children for one full year.”

To make matters worse, that $40 billion is on top of the estimated $150 billion lost at the federal level nationwide.

“By using offshore tax havens, corporations and wealthy individuals shift the tax burden to ordinary Americans, forcing us to make up the difference through cutting public services, growing our already big deficit, or raising taxes on everyday citizens.”

Impact on the Ocean State 

Rhode Island fares better than many other states in terms of the actual dollar amount of tax revenue lost to offshore accounts but when compared to its regional neighbors, the impact on the Ocean State is immense.

Only Connecticut and Massachusetts, two much-larger states with budgets four and five times the size of Rhode Island, respectively, suffer bigger losses to tax avoidance among New England states.

Massachusetts is actually the seventh hardest-hit state in the country overall in this regard, losing an estimated $1.6 billion per year to offshore accounts.

In Connecticut, which has a $40.5 billion annual budget, approximately $904,000,000 in tax revenue never reaches the state’s accounts.

By comparison, the losses Rhode Island faces each year represent nearly three percent of its annual $8.1 billion budget and, the RIPIRG says, the impact of the state actually collecting that money would make a huge difference.

“The $229 million lost in Rhode Island would have been enough to pay the salaries of over 3,700 teachers, based on the average teacher’s salary in Rhode Island ($60,923),” RIPIRG said. “The $229 million also would have been more than enough to eliminate the state’s projected $69 million budget deficit or cover Rhode Island College’s in-state tuition for over 30,000 students ($7,598).”

Help WAS on the way

Two members of Rhode Island’s Congressional Delegation have actually taken steps at the national level to address this very problem but, so far, have gotten nowhere in their quest.

Two years ago, Representative David Cicilline introduced the Offshoring Prevention Act (H.R. 2280), which would have ended tax breaks that encourage companies to ship jobs overseas.

"With our country facing so many challenges at home and abroad, Congressman Cicilline feels strongly that corporations and wealthy Americans should be asked to pay their fair share,” said Richard Luchette, a spokesman for Cicilline. “Loopholes in our tax code, including those that create offshore tax havens, prevent this from happening."

On the other side of Congress, Rhode Island’s Senator Sheldon Whitehouse introduced a similar bill to Cicilline’s, S. 45, in 2011 but it, too, died before making any traction.

Whitehouse was also a co-sponsor of an amendment by Senator Carl Levin last year that would have allowed “the Treasury Department to take a range of measures against foreign governments and financial institutions that significantly impede U.S. tax enforcement.”

“It’s time to put an end to offshore tax abuses that allow tax cheats to profit at the expense of honest taxpayers,” Whitehouse said at the time. “I’m proud to support Senator Levin’s amendment, which will give the U.S. Treasury greater powers to crack down on offshore tax abusers and the banks that aid them.”

Luchette says Cicilline, who has since co-sponsored legislation from Representative Llyod Doggett called the “Stop Tax Haven Abuse Act”, plans to continue pushing for the Offshoring Prevention Act to pass through Congress.

"This is a commonsense proposal that would help to keep jobs here in the United States,” he said. “And Congressman Cicilline intends to reintroduce this bill in the 113th Congress."

A Set of Solutions

Citing a gridlocked Congress, the RIPIRG report urges states to take the matter of offshore tax loopholes into their own hands to minimize the losses they suffer annually.

The RIPIRG offers five solutions they say would make an immediate impact and would close loopholes and increase the ability for states to “detect and penalize tax avoidance.”

First, they urge states to “decouple” their tax system from the federal tax system, which would break the connection between the two levels of government and let states monitor their own structures so that individuals and corporations skirting federal law wouldn’t also get a free pass at the state level.

In addition, RIPIRG says that states should require worldwide combined reporting for multinational corporations, which would add up all the profits earned around the world by a company and tax a share of those profits according to the company’s “level of activity in each country”. This change would, in theory, prevent companies from shifting profits to tax-friendly nations like Bermuda or Ireland.

The report also advocates for states to reject a federal “territorial” tax system and to require companies to disclose more of their financial information, specifically information related to said corporations’ business presence in other countries.

“These measures would provide more information for state authorities to search for red flags, decide when to audit and crack down on abuse.”

Finally, RIPIRG says states should withhold state taxes as part of the federal Foreign Account Tax Compliance Act.

The move would work just like it does at the federal level, with states collecting income taxes on companies that transfer funds to “foreign financial institutions that do not comply with U.S. disclosure and reporting requirements.”

“Some budget decisions are tough, but closing the offshore tax loopholes that let large companies shift their tax burden to the rest of us is a no-brainer,” Pierannunzi said.

Cicilline praised the organization’s attempts to curb the problem.

"As we work to get our country back on the right track, it is critical that we get corporations and wealthy individuals to pay their fair share in taxes," he said. "I applaud RIPIRG's effort to highlight the use of offshore tax havens, and I look forward to working with them to close these loopholes."

 

Related Articles

 

Enjoy this post? Share it with others.

Comments:

Chris MacWilliams

"Congressman Cicilline feels strongly that corporations and wealthy Americans should be asked to pay their fair share,”

This is the guy that left our capital city bankrupt! Now he wants to impress N.Pelosi with lots of new found $$$$. There is no interest stronger than SELF-INTEREST

pearl fanch

The US needs to lower corporate tax rates, and US companies won't hide their money.

The money doesn't belong to the US govt. It belongs to the corporations.

The sooner the govt realizes that, the sooner we'll all be better off.

David Beagle

Rhode Island should be more concerned with the tax structure here, that causes companies to close down or leave the state before they worry about too much else. At least if companies could due business here the state could lean on them for taxes, but too many have given the state the middle finger and just left. Not unlike roofers,landscapers, and restaurant owners paying help under the table. Little bit of tax dodging there too, among other issues.

Mateo C

people would have less of an issue paying taxes if there was more transparency with the methods used to cover what those taxes are for: i.e., excise taxes going toward road repair, etc. as it is now RI taxpayers feel (and rightly so) that we are often being taxed twice for the same services. there is a spending problem, not a revenue problem.

C B11

“It’s time to put an end to offshore tax abuses that allow tax cheats to profit at the expense of honest taxpayers, ...Sheldon Whitehouse” ...coming from a man who made millions doing the same thing Martha Stewart went to jail for! What HYPOCRITES! No worries - As soon as they realized how many of the bigwigs in Washington are guity of off-shore banking, this will be quickly and quietly put in the ole circular file cabinet ...never to be seen or heard from again!

Dave Johnson

I'm happy to "pay my fair share". But when does the incredibly reckless government spending end??? Hmmm? When? Ever?

Joyce Bryant

Drive around the state and see how many businesses are empty, with signs that say "building for lease". In the end the only ones left to pay the Democrats' high tax rates are the Middle Class who are fast becoming the Working Poor.

James Hackett

Hmmm…what is he saying here? The author and RIPIRG craftily dodge whether this "tax-dodging" is legal or illegal, although the implication is certainly there.
Is he suggesting that I should not take the deduction for mortgage interest I have paid, thereby "dodging" taxes?
Sounds like RIPIRG is a bunch of Obama acolytes, sowing the seeds of envy and class warfare.
How about this - stop stealing money from those who work for it, merely so a bunch of slimy politicians can dole it out like crack to a bunch of crack-heads for the express purpose of keeping them in office. Maybe then people won't have to engage in "tax dodging."

anthony sionni

cicilline is a joke




Commenting is not available in this channel entry.