States lose $40b in revenue to offshore tax havens, MASSPIRG study says
While the debate over offshore tax loopholes generally takes a national focus, a consumer advocacy group is reporting that states lose nearly $40 billion a year in tax revenues to companies and wealthy people who shelter money abroad.
Multinational corporations accounted for $26 billion of that lost revenue in 2011, according to the Massachusetts Public Interest Research Group, a nonprofit known as MASSPIRG, which helped conduct a national study of the impact on states of offshare tax havens.
Massachusetts had the seventh-highest loss of revenue, at nearly $1.7 billion, according to the study; most of that 00$1.25 billion -- is related to companies. Another $439 million is from individuals taking advantage of tax loopholes, something that became part of the public debate when Mitt Romney was running for president.
“At the federal level, there’s a whole conversation going on right now about some possible severe tax changes,” said Phineas Baxandallcq, senior analyst for tax and budget policy at MASSPIRG. “We want to make sure that some of this low-hanging fruit is part of the conversation.”
The group is suggesting a number of remedies for the corporate tax dodge, including taxing companies based on their level of activity in this country, rather than allowing them to shift relevant profits to tax havens such as Bermuda or Ireland.
MASSPIRG, which was expected to release the study Tuesday at a press conference in Charlestown, also is recommending that states “decouple” their tax systems from the federal one. That would mean companies that are allowed to shelter income from the IRS would still have to report profits to states where they do business.
The report’s conclusions -- ways to collect more taxes -- appear to run counter to proposals floated last week by the Greater Boston Chamber of Commerce, aimed at decreasing the tax burden for companies.
The Chamber did not address offshore tax loopholes, however, and officials there declined to comment on the MASSPIRG study.
The $40 billion that states allegedly lose to foreign tax breaks is roughly equal to total state and local spending on firefighters or parks and recreation, the MASSPIRG report said.Beth Healy can be reached at email@example.com.