American Tax Evasion by Stacy Noll

America’s economy today is slowly recovering from a major down fall, and as Americans struggle to recuperate, they are not very optimistic about the future.  In fact, businesses are afraid to take risks in investing, employing, and rebuilding.  Corporations to small businesses have taken a detrimental hit, and it has destroyed the economy in America.  Yet, how far would a company go to recover from this disaster?  Would they consider doing something unethical?  Unfortunately, some corporations have found loopholes in the United States tax system to avoid taxes.  They simply do this by having their business located in low income tax countries like the Bahamas (Gravelle, J., 2009, p.729).  Businesses that do this would only be obligated to pay the Bahamas tax rate that is set at zero percent.  Corporations that take this action avoid the US tax rate of 35 percent.  Paying no corporate tax affects the economy, because these rates are set to support the US health care system, police, firefighter, and most importantly education.  However, if corporations have to pay such high tax rates, this could affect the economy by taking money away from creating jobs, investments, and even rebuilding America.  Although corporations, like Google, do not agree to pay these high tax rates, they are clearly not helping the revival of America by disregarding equality, taking money away from the government, and only giving money to the rich.

 

Stated in the Declaration of Independence, the United States of America is built on “truths to be self-evident, that all men are created equal, and among these rights are Life, Liberty and the pursuit of Happiness.”  Since America values are built on the Declaration of Independence, it shapes our culture, and it is expected for every American to act the way that our foundation was laid upon.  When laws are applied in American’s lives, all Americans have to abide by the rules; there should be no exceptions.  The tax laws that come into place should enforce the same percentage for all corporations and businesses.    

 

It is not fair if a corporation does not have to abide by the same rules, because the government gains tangible items from the company (Gravelle, J., 2009, p.731).  These gains are known as capital gains, and consist of some sort of exchange of money.  Some examples of exchange are supporting politicians, investing in America, and of course tax breaks.  Taking this course of action makes corporations like Google seem too consumed with themselves and their profits.  In fact, Google supported our very own president in the 2012 election by contributing over 800 thousand dollars towards his re-election (OpenSecrets.org, 2013).  In 2011, it was reported that Google only had to pay a 2.4 percent corporate tax rate, because they had their profits claimed in another country (Sokatch, J., 2011).  The correlation between investing in the president and receiving a lower tax rate without any repercussions is a strange situation and should be illegal.  Other businesses that view these transitions should question if the law is being upheld.  They should question if the president is even abiding his own proposal named “Stop Tax Haven Abuse Act” (Gravelle, J., 2009, p. 728).  The Tax Act was supposed to stop corporations from only paying the foreign tax, because their American profits should be taxed at the appropriate rate.  Yet, companies like Google are somehow getting away with this, and it needs to stop.  The Tax law needs to be more defined and clear.  Loopholes shouldn’t exist, and extortion should be illegal to make everything equal once again.

Our president, Congress, and even the people need to realize that not only our equality is being taking away from us, but money is being taking away from the government.  Since Google has found loopholes, in 2010, America has lost 60 billion dollars (Sokatch, J., 2011).  This money could have gone to help balance the budget, help put money back into our military, police officers, and schools.  America is constantly looking for the money to help rebuild our country, but all of it could be fixed if corporations and businesses just pay their taxes.  Small businesses have to pay their full tax rates and so do Americans.  Therefore, budget cuts are understandable, because only some small business and Americans are contributing to society.  The budget deficiency is being raised instead being paid off, because of the constant reputation of small contributions toward taxes.  Not paying these taxes are only taking away from the government.  Some corporations like Google might be helping the economy by creating jobs with this extra money found through the loopholes, but it’s not really helping the economy.  The United States needs to reclaim this money and help the whole economy bounce back instead of one area.  A company that pays the appropriate taxes will still profit even though they have to pay a high rate.  Google can afford it, because their total in profits across the country was 29.3 billion dollars (Businessmba.org/google-facts, 2012). They can’t afford 10.3 million dollars in taxes?  This amount of money does not seem detrimental to the company.  Again they would be simply contributing to society, and paying what is owed.  It is time for the loopholes to be closed, and for America to bounce back.

 

If Americans let these loopholes to continue to exist they are only giving money to the rich.  In the election, President Barack Obama raised over 314 million dollars for his re-election, and his contributors came from individuals from large corporations (OpenSecrets.org, 2013).  In fact, six of his top contributors came from major universities.  The total contribution from those universities was over three million dollars.  Instead of putting that money towards struggling students who cannot afford a higher education, these universities decided to invest millions of dollars in pressured televisions ads, senseless debates, and it help pay for one man’s road trip across the USA.  What about education?  In 2012 alone 37.1 million dollars of debt was created from student loans for a higher education, making an estimated total between 902 billion dollars to one trillion dollars in student loans (American Student Assistance, 2012).  Instead of contributing to the president’s re-election, the universities could have lowered their tuition.  They should be investigated by the IRS like Google, because they may be obtaining a capital gain as well.  The rich should not be giving money to the rich, but investing in the future.  Put the money back into the health care system, education system, police force, and fire force. 

             

Overall, this huge problem in our tax system can be fixed, and it should start with our leader, our president and congress.  They should go back and re-think the presidents law that was implanted and make it stronger.  Our leaders can fix the loopholes and reform America.  The corporations are facing a high tax, but instead of breaking the law, they should try to change it.  Investing in the president should influence him to lower the tax rate overall, not to pick and choose who obtains the tax breaks.  Making it illegal to not pay the correct taxes should be enough to influence a corporation to pay their taxes.  Yet, lowering the tax rate would let these corporations not take such a detrimental decrease in profits.  It might not seem like a lot of money to an average American, but 35 percent of profits taken away which does affect the business.  In fact, the corporate tax rate in the US is the second highest in the country (Sokatch, J., 2011).  When these corporations finally contribute back to society it will still take time for the economy to revive again, but at least America will be back on the road to recovery.  Once the economy starts bouncing back, America can be optimistic once again to live the American dream of life liberty, and the pursuit of happiness.  

 

 

References

American Student Assistance. (2012, April 9). Student loan debt statistics. Retrieved from

            American Student Assistance: http://www.asa.org/policy/resources/stats/

Businessmba.org. (2012, April 9). Google: behind the numbers. Retrieved from Businessmba.org: http://www.businessmba.org/google-facts/

 

Gravelle, J. G.  (2009, December).  Tax Havens:  International tax avoidance and evasion.  National Tax Journal, Vol LXII, No. 4, 727-753.  Retrieved from http://search.proquest.com

 

On tax cuts, loopholes and avoidance: Working for tax justice. (2001). Multinational Monitor, 22(6), 24-29. Retrieved from http://search.proquest.com

 

OpenSecrets.org. (2013, March 25). Barack Obama Top Contributions. Retrieved from

            OpenSecrets.org: http://www.opensecrets.org/

 

Sokatch, J.  (2011).  Transfer-pricing with software allows for effective circumvention of subpart F income:  Google’s “sandwich” costs taxpayers millions.  The International Layer, 45(2), 725-747.  Retrieved from http://search.proquest.com