Close Loopholes, Fix Potholes
by SCOTT KLINGER
May 14, 2014 | 858 views | 0 0 comments | 10 10 recommendations | email to a friend | print

Close Loopholes, Fix Potholes

Scott Klinger

America has an infrastructure crisis.

We see signs of it every day: We hit bone-jarring potholes as we drive. We face long detours as bridges are closed for emergency repairs. When water mains break, businesses must temporarily close and homeowners have to boil their water. Too many of our kids attend schools that have leaky roofs and rattling windows.

Potholes Show Infrastructure Needs

_chrisUK/Flickr

This infrastructure crisis is costly. Damage caused by pothole-ridden roads costs the average family $355 a year. By 2020, businesses and workers can expect to face $430 billion in added costs due to deficient roads and bridges, according to the American Society of Civil Engineers (ASCE).

America also faces an ongoing job crisis. Nearly 10 million Americans remain out of work five years after the economic recovery began — the slowest economic rebound since the Great Depression. More than a third of unemployed Americans have been looking for work for more than six months. There are three job seekers for every job opening.

Fixing our crumbling infrastructure would create jobs. It would also save money in the future because as the condition of our infrastructure worsens, the cost to repair it only grows. But instead, we’ve reduced the amount of money available for infrastructure repairs.

ASCE gave U.S. infrastructure a “D+,” noting that it would take doubling this kind of spending, increasing it by $125 billion a year over many years, to restore our infrastructure to good working order. Making this investment would create 2.5 million new jobs, according to The Bridge to Prosperity, a report issued by the Center for Effective Government and to which I contributed.

It doesn’t take a genius to see that public investments could solve both crises at once.

But there’s a third problem: Our nation’s corporate tax code is so chock full of loopholes that it is leaking revenue worse than the cracked storm drains that run through our communities.

Each year, taxpayers lose an estimated $90 billion in corporate tax revenue as many American multinational corporations use accounting gimmicks to make profits earned in the U.S. appear on the books in offshore tax havens. To cover the cost of offshore tax abuse by corporations and individuals, the typical American family would have to shell out $1,256 a year, according to Picking Up the Tab, an annual report by the U.S. Public Interest Research Group.

The good news is that by closing offshore tax loopholes, we can go a long way toward fixing our infrastructure problems, and we can create new jobs – good jobs – to boot.

We can stop companies from transferring their patents, trademarks, and other intellectual property to a subsidiary in a tax haven like the Cayman Islands. And we can prevent companies managed in the United States from registering their subsidiaries in a tax haven country. Often, these subsidiaries are mere P.O. boxes, and these sham transactions only serve to avoid U.S. taxes.

Some national leaders argue that to finance infrastructure investments, we should give companies with untaxed profits booked offshore a massive tax discount if they “bring the money back” to the United States. The problem is that Congress tried this in 2004, and the American taxpayer got burned. Nonpartisan studies found that despite a quick, one-time burst of revenue, tax holidays actually add to the deficit, with companies booking more profits offshore after the holiday ends, rightfully expecting that Congress will give them another one.

Rep. John Delaney (D-MD) and Sen. Michael Bennet (D-CO) have introduced a bill taking this wrong-headed approach, which would result in less money to invest in infrastructure.

Rather than rewarding the very companies that have gamed the tax system to avoid paying their fair share, we need to close the loopholes in the corporate tax code that force average taxpayers to foot the bill for corporate tax dodging. That money could be put to better use filling the potholes in our streets and the leaking pipes that run beneath them.

Scott Klinger is the Director of Revenue and Spending Policies at the Center for Effective Government. foreffectivegov.org

Distributed via OtherWords.org

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