Small Business Minnesota and others participated in a lobby day last week in collaboration with the Financial Accountability and Corporate Transparency (FACT) coalition. They shared the business case for ending offshore tax haven abuse and other small-business tax fairness concerns with their congressional delegations.
“While Small Business Minnesota tends to keep our focus within the state, some issues are best resolved at the federal level,” said Audrey Briton, Small Business Minnesota’s public and government relations director, who visited the offices of Minnesota congresspeople. “When some issues are addressed only at the state level, it can provide an incentive for businesses to simply move to other states.”
Tax havens At least 82 of America’s top 100 publicly traded companies shift profits to offshore subsidiaries. Many of these offshore subsidiaries are nothing more than PO boxes. When big businesses avoid taxes, small businesses pick up the slack.
“We saw a photo of one small building in the Cayman Islands that was home to almost 19,000 corporations,” said Britton. “I think most Small Business Minnesota members understand that businesses big and small rely on the public services that tax dollars bring, like roads, transit, education, security. Why should one type of business pay for these public goods and not another? It creates a tax-fairness issue that puts small businesses on the losing end.”
Congressmen Carl Levin (MI) and Lloyd Dogget (TX) are sponsors of the Stop Tax Haven Abuse Act, (S.1533, companion HR 1554).
Email your congresspersons to express your support for ending tax havens.
Shell companies A business doesn’t have to go to the Cayman Islands to avoid taxes. The US is one of the easiest countries in the world in which to set up shell companies.
Shell companies, “companies” that don’t actually do business, are used to avoid paying taxes, taxes that are then paid by the rest of us. They are also used to hide the source of political contributions—by one estimate 17 percent of political contributions. Shell companies can also be used as fronts for fraudulent activities or to launder money from a variety of illegal activities such as bilking schemes, illegal drugs, human trafficking, and illegal arms dealing. However, when it comes to tracking down illegal activities, shell companies can be dead-end investigations.
States like Delaware thrive on the registration of shell companies as a source of state income. More than 280,000 corporations reside at a single address in Delaware. Additionally, nearly half of all public corporations in the United States are incorporated in Delaware. Many are legitimate; many are not.
The creation of shell companies in the United States is actively supported by the Secretary of State association (including support from Minnesota), the US Chamber of Commerce, and Delaware’s lobbyist.
Congressmen Chuck Grassley (IA) and Peter King (NY) are authors of the Incorporation Transparency and Law Enforcement Assistant Act that addresses some of the problems with shell companies.
Email your congresspersons to express your support for the Incorporation Transparency and Law Enforcement Assistant Act.
Federal tax extensions In Minnesota many big-business tax favors are included in a log of rarely reviewed “tax expenditures.” Small Business Minnesota has long expressed concerns about these tax exceptions that exceed 50 percent of the state budget and, when it comes to business, almost always favor big, profitable businesses over small businesses.
“It’s about tax fairness,” said Britton. “Small businesses make up 50 percent of our nation’s GDP and 50 percent of our workforce. The average small business owner makes $40,000 a year. Yet most, if not all, business-related tax favoritism goes to large, often extremely profitable big businesses with CEOs making tens-of-millions each year.”
At the federal level these tax favors are called tax extensions. While in Washington, D.C., Small Business Minnesota specifically asked federal legislators to co-author a bill to end federal tax extensions that costs U.S. taxpayers billions each year.
After our meetings, Senator Ron Wyden (OR) Finance Committee chair, took the bold step to publically have this loophole removed. The loophole was placed back into the tax extender bill behind closed doors.
Email your congresspersons and tell them you support Senator Wayden’s effort to remove big-business loopholes.