Nathan Proctor: Republican assault on small business
There is a reason that Gary Cohn, White House economic advisor, has noticed the excitement from big CEOs over the current tax plan. The tax plan, which will be voted on by the full U.S. house in the next week, is targeted at helping not just businesses in general, but large multinational businesses in particular.
But what about Main Street businesses in Lee or Pittsfield?
Surely they would welcome a simpler, fairer tax code. But, as it currently stands, this tax bill would further tip the scales against small business in favor of large multinational companies.
It all starts with the offshore shell games.
Hurting small business
In order to dodge taxes, large multinational companies stash profits offshore, where they are allowed to "defer" taxes indefinitely. Mostly those profits are booked to tax havens, where the corporate tax rate is at or near 0 percent. Predictably, this has resulting a massive stockpile of cash offshore. The most recent estimate put it at $2.6 trillion, which represents some $750 billion in unpaid taxes.
If you are a Main Street business, this means you have to compete with larger, multinational companies while at a disadvantage because you have to pay taxes your competitors don't.
It's hard enough to compete with big companies as a small business, and the federal government shouldn't make matters worse by letting big companies avoid their responsibilities.
Instead of closing these loopholes, the bill moving forward in Congress right now would make them worse. They would slash the tax bill owed by offshoring companies by hundreds of billions of dollars and widen loopholes that reward offshoring moving forward.
According to Small Business Majority, the tax provisions which tax writers claim will help small business won't do much. The cut on "pass-through" entities, often used by small businesses, won't affect many Main Street businesses — as 9 in 10 already pay less than the 25 percent top rate being introduced. Even if the business does see a lower tax bill, owners report concern about being further harmed by tax programs that help bigger competitors far more and cuts in the critical programs that small businesses rely on to keep local economies steady in uncertain times.
Earlier this month, we got a historic, inside peek at some of the elaborate schemes these companies employ to dodge taxes. The Paradise Papers were leaked — millions of documents which catalog how large multinational companies and super wealthy individuals manipulate tax havens to avoid paying taxes or hide their financial activities.
One would think, as these shocking details were revealed, that Congress would move to tighten their controls for offshore tax dodging. But they quickly moved to do the opposite, gutting a provision that would have at least recouped some of the lost taxes.
Neal shows leadership
If there is a bright side to this, it would be that interest in cracking down on tax haven abuse is gaining new traction.
Western Massachusetts' Rep. Richard Neal of Springfield, the top ranking Democrat on the committee, has shown resolve which deserves recognition. While the majority was gutting rules for offshoring companies, Rep. Neal backed an amendment to completely end these shells games.
As the Senate takes up its version of reform, the fact that Rep. Neal has set the tone on the offshore tax issues is important given his position as the top tax writing Democrat in all of Congress. Many will look to his leadership.
As we saw with health care, the Senate is tougher to rush bills through. As more details about what this tax actually does get reported, digested, as the rest of us have a chance to speak up, it gets harder to ignore the worst impacts of bad reform.
But the only way we can prevent bad reform is if we take that chance to speak up.
Nathan Proctor is state director of Massachusetts Fair Share, and on the steering committee of the national FACT Coalition, which fights tax haven abuse.
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