Tomorrow is the legislative hearing for one of the bills we’re following closely here at The Sockeye: the Tax Haven Bill, or as we like to call it, the Make Corporations Pay Their Fair Share and Stop Them from Avoiding Billions in Taxes with Off-Shore Accounts Bill.
As Oregon’s population and economy have grown over the years, the amount of revenue collected from personal income and property taxes has grown too. This isn’t necessarily a good thing, though – Oregon’s taxes are regressive, meaning the lower your income, the higher the percentage of it that you have to pay in taxes. While working Oregonians have been paying more in taxes, corporate taxes have stayed flat. This is partially due to the fact that big corporations and the wealthy use every loophole in the book to avoid paying the taxes they owe. Many corporations take advantage of Oregon’s minimum corporate tax – a staggering $150 a year – and our state’s corporate tax rate is the lowest in the country.
One of the main drivers of this backwards trend is the abuse of offshore tax havens. Tax havens work much like their name implies – they shelter corporate profits from state and federal taxes. (Think Luxembourg, the Cayman Islands, Singapore…) Oregon’s corporate income taxes are based on the amount of taxable income – or profits – a company reports. If a portion of that income is tucked away in a tax haven (and therefore unreported), the amount of revenue the state can collect is less than it should be.
Bloomberg News recently reported that U.S. Fortune 500 companies have parked a staggering $2 trillion in profits in offshore subsidiaries. Hiding these profits from taxation costs states billions of dollars in much-needed revenue each year, and all but eliminates funding for things like bridge and road repair, or investments in schools.
In 2013, the Oregon Legislature passed a law to crack down on offshore tax haven abuse. The law, which requires corporations to report income in known tax havens when calculating their Oregon taxes, is expected to bring in tens of millions of dollars in revenue each year.
The law also included a list of tax havens – but it certainly isn’t exhaustive. The Department of Revenue released a report in January with several recommendations for additions and revisions. The DOR recommends adding Hong Kong and Switzerland, two of the tax havens used most frequently by Fortune 500 companies. (Ireland was left off of the DOR list, but we think it should also be added – it’s featured prominently in many schemes to abuse offshore tax havens.)
This anti-tax haven law works – how do we know? The Grand Duchy of Luxembourg, the same Luxembourg that was recently called “the magical fairyland of tax evasion” and the biggest tax haven in Europe, went so far as to submit a lengthy memo arguing they should not be included on Oregon’s tax haven list. We’ve created a Luxembourg calculator to show just how much money these corporations save by funneling their profits into shell corporations. Want to have some fun? Use our calculator to pretend you’re a Fortune 500 company and see how much money you’d save!
Calculations based on effective tax rates by adjusted gross income from 2012 Oregon and federal tax returns, Oregon Department of Revenue.
While you’re calculating your Luxembourg Loophole Savings, be sure to encourage the House Revenue Committee to maintain the tax haven law and expand it to include some of the world’s most commonly used tax haven countries.
With the exclusion of some the largest tax havens, like Hong Kong, Switzerland, and Ireland, Oregon taxpayers are still picking up the tab for the world’s largest corporations who refuse to pay their fair share.