Picking Up the Tab - How US Citizens Are Being Fleeced by Tax Havens

The ever excellent US Public Interest Research Group has published the findings of its research into how much tax avoidance costs ordinary American citizens, and they make for shocking reading. The headline news is that the average U.S. tax filer in 2011 would have had to pay US$426 to make up for revenue lost from corporations and rich people shifting income to offshore tax havens.

The highlights from Picking Up the Tab are summarised below:

Some U.S.-based multinational firms or individuals avoid paying U.S. taxes by transferring their earnings to tax haven countries with minimal or no taxes. These tax haven users benefit from their access to America’s markets, workforce, infrastructure and security; but they pay little or nothing for it—violating the basic fairness of the tax system and forcing other taxpayers to pick up the tab.

Even when tax haven abusers act perfectly legally, they force other Americans to shoulder the burden in a variety of ways. The taxes they don’t pay must be balanced by other Americans paying higher taxes, coping with cuts to public spending priorities, or increasing the federal debt.

Congressional studies conclude tax haven abuse costs the United States approximately $100 billion in tax revenues every year. Multinational corporations account for $60 billion and individuals the rest.

If ordinary tax filers were to pick up the full $100 billion tab in the form of higher taxes, they would need to pay an additional $426 on average. That’s enough money to feed a family of four for three weeks.

The states where taxpayers pick up the largest share of the tab are Delaware and Minnesota. On average, tax filers in those states would pay an additional $1,317 and $774, respectively.
Based on the $60 billion multinational corporations avoided in taxes, small business in the United States would need to pay an average of $2,116 each in additional taxes. Small businesses can be hit particularly hard by the effects of tax havens because they are generally unable to use these tax schemes and are put at a competitive disadvantage.

If the $60 billion burden from multinational companies using tax havens were shouldered entirely by small businesses, each state’s small businesses would have to chip in hundreds of millions or even billions of dollars more. The largest total sums would be shouldered by small businesses in California ($7.1 billion), New York ($5.2 billion), Texas ($4.9 billion), Illinois ($3.0 billion), Ohio ($3.0 billion) and New Jersey ($2.9 billion).

Because some local counties have more small businesses than others, the tab from multinational corporations’ use of tax havens is not felt evenly throughout each state. The following five counties face the greatest extra burden: Los Angeles County, California ($2.1 billion); Cook County, Illinois ( $1. 4 billion); Harris County, Texas ($870 million); New York County, New York ( $790 million); Kings County, New York ($680 million).

Read the findings of Picking Up the Tab here.