Tax havens unfair to small businesses

The Washington Post Published: April 22

The latest deficit-reduction plan offered by Erskine Bowles and Alan Simpson supports the interests of big business at the expense of the United States’ small businesses by calling for adoption of a territorial tax system. In two recent polls, small-business owners have soundly rejected making abuse of offshore tax havens by multinational organizations legal and permanent.

A March poll sponsored by the American Sustainable Business Council and Main Street Alliance found that 85 percent of those surveyed, including 67 percent of Republican small-business owners, opposed a territorial tax system that would exempt foreign profits from U.S. taxes. The National Small Business Association reported that only 16 percent of small business owners they polled supported a shift to the territorial tax system.

Elected leaders should not support any proposal for taxing multinational corporations that small business owners view as wrong and unfair.

Frank Knapp Jr., Washington

The writer is vice chairman of the American Sustainable Business Council.

Original Article

Media correcting the lies

It is satisfying to know that persistence in correcting false information pays off. 

One of the on-going lies about Obamacare is that it imposes a tax on small businesses.  This lie has been told over and over by the National Federation of Independent Business (NFIB) that has taken millions of dollars from GOP-related organizations in order to attack the healthcare reform law.

GOP Vice-Presidential candidate Paul Ryan repeated this lie in his speech at the Republican National Convention Wednesday evening.  Fortunately the national media has heard the truth from those like me who want to see Obamacare successfully enacted. 

In a Washington Post story yesterday under the heading “The true, the false, and the misleading: Grading Paul Ryan’s convention speech” was the following.

Paul Ryan declared that the Affordable Care Act would impose “new taxes on nearly a million small businesses.” The Act changes taxes for small businesses in three ways. It provides a tax credit (pdf) to subsidize insurance coverage for which between 1.4 and 4 million small businesses are eligible. It imposes a tax on medical device manufacturers, of which there were only 5,300 (pdf) in the United States in 2007. Finally, it imposes an employer mandate on businesses that do not provide coverage, which will not affect (pdf) businesses with under 50 employees. Most small businesses, then, get a tax cut, and the number of small businesses facing tax increases is about five thousand, far under a million. Ryan’s claim is just false.

Unfortunately, GOP Presidential candidate Mitt Romney didn’t read the fact-checking reviews of Ryan’s speech because last night he gave an abbreviated version of the lie saying of President Obama, “His plan to raise taxes on small business won’t add jobs, it will eliminate them.”

But as for factual information about small businesses, a Gallup poll released this week shows “small-business-owner satisfaction is up sharply.”

…despite the challenges small-business owners face, 55% are extremely or very satisfied with being a business owner and another 29% are somewhat satisfied, for a combined 84% saying they are satisfied to some degree with being a small-business owner.

This doesn’t sound like all small-business owners have succumbed to the fear the NFIB and some politicians are trying to instill in them with lies about Obamacare.

 

Look who pays less in taxes than Buffett and Romney

The Hill's Congress Blog

By Scott Klinger, tax policy director, Business for Shared Prosperity

03/01/12 03:12 PM ET

Corporations pay a lower effective tax rate than Warren Buffett and Mitt Romney, but you wouldn’t know it from all the complaints that our corporate tax rate puts our country at a competitive disadvantage. Last year, U.S. corporations paid just 12.1 percent of their earnings in federal corporate income taxes. Buffett’s tax rate is 17.4 percent; Romney’s reported 2010 tax rate was 13.9 percent.

The corporate tax system is riddled with loopholes and subsidies that do create competitive problems, but not the ones CEOs are talking about. Our broken tax system blesses U.S. multinational corporations with lots of loopholes that enable them to pay less in taxes than Main Street businesses. It allows large companies, even those in the same industry, to pay vastly different tax rates. It has starved our government of revenue, adding to the pressure for deep budget cutbacks rather than the investments needed to rebuild our crumbling infrastructure, educate our children and support the innovation needed for economic success.

President Obama has called for corporate tax reform that is “revenue neutral” – using any revenues gained from closing loopholes and ending subsidies to pay for lowering the statutory corporate tax rate and extending or introducing other tax breaks. The problem with “revenue neutral” tax reform is that it locks in the corporate share of our government’s bills at historically low levels. Tax reform that results in GE paying more and Wal-Mart paying less is not a step forward.

Contrary to common perception, U.S. corporations pay far less toward the cost of public services and infrastructure than they did in decades past, and less than foreign competitors pay in their countries today. In the 1950s, corporate federal income taxes accounted for nearly one-third of federal government revenue; in 2011, corporate taxes accounted for less than 8 percent.
U.S corporate profits account for more than 10 percent of GDP, a 50-year high. Federal corporate income taxes collected as a percent of GDP are at a 50-year low.

U.S. corporate tax revenues as a percent of national GDP are lower than all but one industrialized country – Iceland. U.S. corporate taxes accounted for 1.2 percent of U.S. GDP in 2009, compared to 2.3 percent among the 26 industrialized nations of the Organization for Economic Cooperation and Development (OECD) that collect and report tax data.

Meanwhile, U.S. multinational corporations are reporting record levels of profits to shareholders. And their balance sheets are loaded with record levels of cash – more than $2 trillion at last count.

President Obama's tax framework addresses important issues such as curtailing the abuse of offshore tax havens, but the devil is in the details. For example, a proposed minimum global tax could reduce the incentive of U.S. multinationals to disguise domestic profits and shift them to low or no-tax corporate tax havens around the world. But if the rate, now unspecified, is set too low it could become a permanent tax break for U.S. multinational corporations whose accountants are expert at assigning expenses to the domestic side of the ledger for U.S. tax deductions while assigning profits to the “foreign” side. And it doesn’t take a large rate gap between the corporate tax rate and a minimum global tax to produce large tax savings for corporations with revenues in the billions.

One way Congress could address closing loopholes right now is through the Cut Unjustified Tax Loopholes Act introduced by Senators Carl Levin of Michigan and Kent Conrad of North Dakota. It would crack down on offshore tax haven abuses and close tax loopholes that encourage corporations to move jobs abroad.

The challenge of corporate taxes and competitiveness is not that rates are too high, but loopholes, preferences and subsidies make corporate tax collections far too low. Rather than focusing on revenue neutral corporate tax reform which locks in corporate tax revenues at bargain-basement levels, President Obama would be wiser to insist that all profitable U.S. corporations – big and small – are expected to pay their fair share of taxes.

Big businesses want all the benefits of government spending – from government contracts, a publicly educated workforce, transportation networks and courts to enforce property rights, to scientific research they are happy to commercialize, and bailouts in the billions. Their increasing unwillingness to pay for the public services and infrastructure that underpin our economy is the real threat to America’s competitiveness.

Click here for original article

Scott Klinger is tax policy director of Business for Shared Prosperity, a national network of business owners, executives and investors.

Small business poll

On regulations, taxes and money in politics…"We're not like them"

Columbia, SC—A national poll shows the opinions of small business owners differ dramatically from the advocacy of big businesses and multinational corporations.  The results of the national scientific poll were released over the past four weeks by the American Sustainable Business Council, Main Street Alliance and Small Business Majority.  The poll was conducted by Lake Research Partners between December 8, 2011 and January 4, 2012. 

"Many of the real opinions of small business owners are far different than what are portrayed by big business interests," said Frank Knapp, Jr., Vice Chair of the American Sustainable Business Council and President/CEO of the South Carolina Small Business Chamber of Commerce. 

"There are some real ‘man-bites-dog’ stories here that are particularly amazing since half of the respondents self-identified as either Republican or leaning Republican," said Knapp. 

"Small business owners do not hate regulations,” said Knapp.  “They support regulations ensuring clean air and water and those moving the country toward energy efficiency and clean energy.  And regulations are not stopping hiring as we've been hearing—lack of consumer demand is doing that.  In fact, small business owners view regulations as protecting them from big business."

“Small business owners also don’t agree with the big business mantra on taxation,” said Knapp.  “They say that big businesses and multinational corporations use loopholes to avoid paying their fair share of taxes which harms small businesses.  A majority of these owners also support higher tax rates on individual income over $1 million, even $250,000.”

“These opinions fly in the face of the rhetoric about not raising taxes on the wealthiest because they are the ‘job creators’”, said Knapp.  “Small businesses are leading the job recovery in this country and they believe the wealthiest corporations and individuals are not paying their fair share of taxes.”

“On other issues small business owners share the public’s disgust with money in politics and disapprove of the Supreme Court’s Citizens United decision,” said Knapp. “Citizens United has unleashed massive amount of money from big corporations and millionaires and billionaires into political campaigns.  Small businesses believed they have been harmed because of this.”

Below are details of the poll results:

• Small business owners see their top problem as weak customer demand, not regulations: 34 percent cited weak customer demand as the most important problem for their business, while only 14 percent named government regulations.
• On the question of what would do the most to create jobs, cutting regulations came in low on the list: the top response was eliminating incentives to move jobs overseas at 24 percent; reducing regulation was fifth at 10 percent.
• Small business owners see an important role for standards and safeguards: 78 percent believe some standards are important to protect small businesses from unfair competition, and 76 percent believe regulations on the books should be enforced.
• Small business owners see regulations as necessary for a modern economy: 93 percent agree their business can live with some regulation if it is fair, manageable and reasonable.
• Small business owners express strong support for specific rules and standards: 78 percent support rules to prevent health insurance companies from increasing rates excessively, 84 percent support food safety standards, 80 percent support product safety standards and 80 percent support disclosure and regulation of toxic materials.
• Small business owners support clean energy policies: 79 percent support ensuring clean air and water, and 61 percent support moving the country towards energy efficiency and clean energy.
• Small businesses believe in streamlining government processes: 73 percent of respondents believe we should allow for one-stop electronic filing of government paperwork.
• Nine out of ten small business owners say big corporations use loopholes to avoid taxes that small businesses have to pay: 92 percent say big corporations’ use of such loopholes is a problem. Three-quarters of owners say their small business is harmed when loopholes allow big corporations to avoid taxes.
• Nine out of ten small business owners say that U.S. multinational corporations’ use of accounting loopholes to shift their U.S. profits to their offshore subsidiaries to avoid taxes is a problem: 91 percent agree it is a problem, with 55 percent saying it’s a very serious problem. When asked what would do the most to create jobs, small business owners chose eliminating incentives to move jobs overseas.
• Small business owners say big corporations are not paying their fair share of taxes: 67 percent believe big corporations pay less than their fair share. An even bigger majority, 73 percent, says multinational corporations pay less than their fair share.
• Small business owners say millionaires pay less than their fair share in taxes: 58 percent say households whose annual income exceeds $1 million pay less than their fair share.
• Small business owners support a higher tax rate for individuals earning more than $1 million: 57 percent agree that individuals earning more than $1 million a year should pay a higher tax rate on the income over $1 million.
• Small business owners want to eliminate the “carried interest” loophole that gives hedge fund managers a big break on their taxes: 81 percent favor hedge fund managers paying taxes at the ordinary income tax rate, which currently tops out at 35 percent, rather than the 15 percent capital gains rate they pay now.
• Small business owners support ending upper-income tax cuts: 51 percent say Congress should let tax cuts on taxable household income over $250,000 a year expire (only 40 percent believe they should be extended).
• Respondents in this scientific national survey were politically diverse, with a majority Republican or independent-leaning Republican: 50 percent identified as Republican (27 percent) or independent-leaning Republican (23 percent); 32 percent as Democrat (14 percent) or independent-leaning Democratic (18 percent); and 15 percent as independent.
• Small business owners say Citizens United decision hurts small businesses:  66 percent of small business owners view Citizens United v. FEC decision as bad for small businesses; 88 percent hold negative view of money in politics overall.

Read the full poll reports at these links:

http://www.asbcouncil.org/poll_regulations.html

http://www.asbcouncil.org/uploads/Taxes_Poll_Report_FINAL.pdf

http://www.asbcouncil.org/poll_money_in_politics.html

http://www.asbcouncil.org/poll_access_to_credit.html

We Urge You to Reject Calls for a "Repatriation Tax Holiday"

Dear Member of Congress:

We urge you to reject calls for a “repatriation tax holiday” allowing U.S. multinational corporations to bring home offshore profits at a reduced tax rate. The proposed repatriation holiday is, pure and simple, an attempt by a few multinational corporations to dodge their rightful tax obligation. It is a tax avoidance measure that will benefit a few corporations, their executives, and their shareholders, while other taxpayers bear the hefty expense.

A repatriation holiday loses revenue and will add to the deficit. While Congress is working to address the projected long-term deficits, a repatriation holiday is a narrowly-targeted tax break that is neither warranted nor affordable.

A repatriation holiday rewards the worst corporate actors. Multinational corporations that are conducting real business offshore are less able to take advantage of a repatriation holiday because they often have reinvested their offshore profits in foreign jurisdictions. In addition, they are paying tax to foreign governments and would have foreign tax credits to offset a portion of the U.S. tax if profits were repatriated under current law. On the other hand, multinational corporations who are merely shifting profits on paper to zero-tax jurisdictions can easily bring those profits back to the U.S. and benefit enormously from a tax holiday.

A repatriation holiday will not create U.S. jobs. The 2004 repatriation holiday, justified as a job-creating measure, was a dismal failure. Many of the companies that benefitted most from the tax holiday actually reduced their U.S. employment. Instead of making investments in production capacity and workforce, companies used their repatriated earnings to pay dividends and finance stock buybacks. U.S. companies currently have plenty of cash already on hand if they want to make investments or hire workers.

Another repatriation holiday encourages corporations to be even more aggressive in moving jobs and profits offshore. If Congress repeats the 2004 holiday, multinational corporations will quite rightfully expect that another holiday will be enacted in a few years. They will have enormous incentive to engage in ever more aggressive tax schemes that move their profits to foreign jurisdictions. In fact, the 20 companies who repatriated the most earnings under the 2004 holiday are already anticipating the next holiday – they now have triple the amount of foreign profits parked offshore that they did at the end of 2005.

We urge you to reject the proposals for a repatriation holiday. The multinationals who are lobbying hard for this tax break offer numerous reasons why you should give them this generous reprieve. But their plea for a repatriation holiday is nothing more than a blatant attempt to escape their tax obligations and shift the burden onto the taxpaying American public.

http://www.tjn-usa.org/current-campaigns

FACT COALITION
Financial Accountability & Corporate Transparency

SCSBCC joins Senator Carl Levin in announcing the Stop Tax Haven Abuse Act

Yesterday morning Frank Knapp of the SC Small Business Chamber of Commerce joined Senator Carl Levin in a Washington, DC press conference to announce the introduction of the Stop Tax Haven Abuse Act. Below are Mr. Knapp’s comments that he made yesterday to the Washington press corp.  Click here to view video.
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I’m Frank Knapp, President, CEO and co-founder of the SC Small Business Chamber of Commerce.

While our members are in South Carolina, small businesses across this country, from California to Washington, DC understand that while they are paying their taxes, many US-based, multinational corporations are not. That’s not fair and it makes us angry.

When multinational corporations don’t pay their taxes, when they use offshore tax havens to cheat, small business have to pay more in taxes.


Frank Knapp (l) and Senator Carl Levin at the
July 12, 2011 Press Conference

Elected leaders like to say how small business is the engine of our economy and they look to us to create most of the new jobs.

Well, we’re tired of subsiding government services for multinational corporations that rely on our courts, our national defense, our infrastructure, and our education system, all of the essential government services that these multinational corporations want and need to be successful.

Small businesses want tax parity with these corporate giants.

We can compete with our goods and services with any multinational corporation but not if we don’t require them to pay their taxes.

These multinationals and their highly paid advocates warn us that creating the transparency needed to spot illegal tax evasion and avoidance, better defining US profits and increasing penalties for offshore tax cheating would somehow hurt our country’s economy.

We’re not talking about any new taxes the money these multinationals are investing in American jobs. We only want the taxes they owe on money squirreled away in post office boxes in the Cayman Islands or Bermuda, profits that aren’t being invested in our economy.

The SC Small Business Chamber is from South Carolina, but this issue resonates with every small business across the nation. Today we are America’s Small Business Chamber and we are patriotically proud to support Senator Carl Levin’s Stop Tax Haven Abuse Act.

Challenging the U.S. Chamber

The nonprofit, membership-driven South Carolina Small Business Chamber will officially be supporting an IRS complaint against the U.S. Chamber of Commerce.

We, along with other business organizations, are questioning potential violations of exemptions under the federal tax law in the U.S. Chamber’s conduct of lobbying and campaign funding. More on this later.

Below is a must-read New York Times story about the U.S. Chamber. If you have not been paying attention to the U.S. Chamber’s heavily financed legislative agenda and how it often is at odds with our agenda, this story should help bring you up to speed.
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The New York Times
October 22, 2010

Top Corporations Aid U.S. Chamber of Commerce Campaign

By ERIC LIPTON, MIKE McINTIRE and DON VAN NATTA Jr.

Prudential Financial sent in a $2 million donation last year as the U.S. Chamber of Commerce kicked off a national advertising campaign to weaken the historic rewrite of the nation’s financial regulations.

Dow Chemical delivered $1.7 million to the chamber last year as the group took a leading role in aggressively fighting proposed rules that would impose tighter security requirements on chemical facilities.

And Goldman Sachs, Chevron Texaco, and Aegon, a multinational insurance company based in the Netherlands, donated more than $8 million in recent years to a chamber foundation that has been critical of growing federal regulation and spending. These large donations — none of which were publicly disclosed by the chamber, a tax-exempt group that keeps its donors secret, as it is allowed by law — offer a glimpse of the chamber’s money-raising efforts, which it has ramped up recently in an orchestrated campaign to become one of the most well-financed critics of the Obama administration and an influential player in this fall’s Congressional elections.

They suggest that the recent allegations from President Obama and others that foreign money has ended up in the chamber’s coffers miss a larger point: The chamber has had little trouble finding American companies eager to enlist it, anonymously, to fight their political battles and pay handsomely for its help. . . . Keep reading

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Join the SC Small Business Chamber in supporting our independent, locally owned hardware stores next month:

Buy SC's Happy Hardware Day!!
Saturday, Nov. 20, 2010
Shop at independent, locally owned hardware stores to show your support for SC small business!