Forcing corporations to pay tax on Maine profits stashed offshore is simple way to enforce tax law
Small business owners can feel a little bit like ping-pong balls when elected officials start talking about taxes.
I’m a board member of the Maine Small Business Coalition, to which 3,600 Maine small business owners belong. I’m also a registered nurse and owner of a home child care center where I employ two people who work with me to care for and educate eight to 12 infants and toddlers. We teach the children to play fair, share and be kind and caring, while their parents, who are almost all small business owners or employed by small businesses, are hard at work.
Whether it’s Gov. Paul LePage attempting to introduce “Open for Business” Zones to two areas of the state or the Legislature’s debate about the impact of revenue sharing on small businesses, it’s mind-boggling to keep track of how we small business owners should respond to the intersection of government and the economy as we experience it from our shops and homes.
One thing is crystal clear, though: When it comes to offshore tax havens, there’s no reason that Maine’s Legislature shouldn’t take action to make sure that big corporations have to play by the same rules as everyone else. Rep. Adam Goode, D-Bangor, has sponsored a bill that will do just that.
How does a tax haven work? Many tax haven countries are small island nations (Bermuda, the British Virgin Islands and the Cayman Islands, for example) with very low or nonexistent taxes. Large corporations hire high-priced lawyers and accountants to scour the tax code for loopholes — loopholes that their lobbyists helped write and their campaign contributions helped pass into law — to transfer reported earnings to tax haven countries to avoid paying taxes in the United States.
One common practice is to license “intellectual property,” such as patents, trademarks and licenses, to shell companies in tax haven countries and then pay that shell company inflated fees to use the intellectual property in the United States. It’s a strategy that serves no business purpose for the corporation other than to avoid paying their fair share of taxes.
As a Feb. 13 Bangor Daily News editorial pointed out, Goode’s bill doesn’t figure to drive corporations out of the state. In Montana, one of the states already successfully recouping money previously lost to tax havens, the number of multinational companies doing business in the state actually rose during the period of implementation. The economic climate was good for those businesses, and the taxes collected were great for Montana’s economy.
One of the intriguing components of Goode’s bill is that it requires, in essence, an adjustment to the way the state of Maine keeps its books. In an era when it seems perfunctory to describe the tax code at any level of government as “complex,” this legislation is a simple method, modeled on states where the policy has already been implemented, to require disclosure of money stored in known tax havens by corporations.
The estimate is that closing these loopholes for corporations would result in another $7 million per year in revenue for Maine. This is money that is already owed to the state coffers; passing this legislation ensures that our bookkeeping mechanism keeps pace with the intentions of the tax code rather than introducing brand new tax policy.
There is also the fundamental question of fairness. Not only am I not able to stash my money in an offshore tax haven (most of it is tied up in mortgage and payroll, which doesn’t leave much left to hide in the Cayman Islands!), I don’t want to avoid paying my fair share of taxes.
Our small businesses work best when the systems and structures of society are firmly in place, which means that potholes on the road are filled in, children go to schools that prepare them for work in the 21st-century economy, and the natural resources we depend on for our business are protected.
Paying my taxes is part of my responsibility as a small business owner and as Mainer. Our legislature should make sure that corporations attempting to game the system by using offshore tax havens to hide profits should have the same responsibility.
Melanie Collins operates a home child care center in Falmouth.
Credit: Bangor Daily News