Tax Loopholes Are Costing New Jerseyans [AUDIO]
Corporate tax loop holes and off-shore bank havens are costing average New Jerseyans and small businesses thousands each year, according to a report from the New Jersey Public Interest Research Group.
The study found in 2012, the average taxpayer has to pay an additional $1,260 in taxes to make up for revenue lost from the use of off-shore tax havens and loopholes by corporations and wealthy individuals.
These tax shelters, though legal, cost the United States $150 billion in lost tax revenue each year, $90 billion of which is avoided by corporations, cites the report.
In New Jersey, this amounts to $2.8 billion lost in state revenue each year the study found, enough to repair Superstorm Sandy damage to the state's gas and electric systems.
"Yes, they're not breaking the law, but the question is should the law be changed," says New Jersey Senator Bob Menendez.
Speaking at a press conference in Asbury Park held by NJPIRG and New Jersey Citizen Action, Menenedez was joined by Congressman Frank Palone, Asbury Mayor Ed Johnson, as well as Jerome Beckman, the owner of Beckman's Newsstand, which was the venue for the event.
The lawmakers did not dispute the legality of the practice, but rather the unfair burden on middleclass residents and small businesses.
"One of the reasons that a small business can't take advantage of the loopholes is because they have to be more transparent," says Pallone, "They can't hire a lawyer or accountant to do these things."
He noted part of the problem lies with a lack of oversight, allowing corporations and individuals to take advantage of loopholes and tax havens.
Menendez pointed out while there is nothing at the moment addressing loopholes and tax haves, a push for tax reform and the lowering of tax rates would need to be accompanied by a closer look at loopholes.
He adds as the federal budget is debated, the Senate and House budgets need to be reconciled; and the $150 billion lost by loopholes and havens can go a long ways towards financial stability for the country.
"We could, for example, by removing these tax loopholes, remove the entire amount of the sequester cuts," Says Menendez.
Locations like the Cayman Islands, Bermuda, and Gibraltar Islands are popular locations for companies to set up subsidiaries as tax havens since those countries collect little to no taxes on profits of foreign companies set up on their territory.
The report cites as of 2008, American multi-national companies have reported 43 percent of their foreign earnings in five small tax payer countries. However, these countries accounted for only four percent of the company foreign workforce and just seven percent of in foreign investments.