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The ongoing shutdown is a nightmare for low-income Americans who, time after time, are the hardest hit when politicians hold the economy hostage for political gain. Vulnerable populations, including many North Carolinians, were already dealing with deep across-the-board sequestration cuts to social programs in March. Now, due to the absence of responsible behavior by the House of Representatives, the shutdown is adding another layer of economic pain to struggling families trying to make ends meet and gain a foothold on the economic ladder. The U.S. House needs to pass a spending plan for 2014, without obligations.

You don’t have to look far to see the devastation that the shutdown—now in its 10th day—is causing among North Carolinians. Read More

Microsoft, the software titan familiar to most Americans, has benefited handsomely from using loopholes in the federal tax code to avoid paying its fair share of corporate income taxes. The corporation has avoided paying $4.5 billion in U.S. income taxes in recent years, according to evidence presented by the Senate Permanent Subcommittee on Investigations (PSI).

To avoid paying income taxes, Microsoft “sold” the right to market its products in the Americas to an offshore subsidiary, which then “licensed” back to the parent company the right to sell its products in the United States. The effect was that in 2011, almost half of the value of Microsoft’s U.S. sales was channeled offshore, and through this “transfer-pricing” shell game the company avoided $4.5 billion in U.S. income taxes over three years.

Senator Carl Levin’s Stop Tax Haven Abuse Act (S. 1533) bill would close two tax loopholes that corporations use to shuffle their intangible property, like licenses and patents, to offshore subsidiaries and dodge paying the taxes they owe. Closing these two loopholes would raise $23 billion in revenue over 10 years. Eliminating such corporate tax loopholes represents a positive step forward in ensuring that profitable corporations such as Microsoft, among others, pay their fair share of taxes.

Apple Inc., the computer giant and maker of the iPhone, is notorious for its tax avoidance schemes. Such gimmicks prompted a Congressional Senate subcommittee hearing on the corporation’s practices last May. A little bit of digging by Congressional staffers revealed that Apple channels tens-of-billions of dollars of profit through three entities that have no home country for tax purposes. So, despite the fact that most of Apple’s profits ought to be taxable, it is able to skirt paying its fair of taxes by setting up offshore tax havens.

As I explained earlier today, Apple is able to check out on billions in taxes by simply checking a box on the IRS tax form. The “check the box” rule allows companies to use offshore entities as a front to avoid paying their fair share of taxes. Currently, businesses can defer US tax on payments made from one dummy corporation to another, which effectively makes their passive income invisible for tax purposes. This rule has allowed Apple to avoid US taxes on $44 billion in profits over four years from 2009 to 2012. Read More

As I explained in this space yesterday, the federal budget process would become a bit more stable and predictable if the recently introduced Stop Tax Haven Abuse Act is enacted. This bill would raise at least $200 billion over the next 10 years by closing corporate tax loopholes that enable multinationals to shield their offshore profits from taxation. Once federal lawmakers deal with the current budget shutdown, the passage of this act would deliver a more balanced approach to addressing the federal deficit. Above all, it would prevent a second round of across-the-board cuts that will only further harm the nation’s most vulnerable citizens at a time when hardship remains high.

One of the four major reforms within the bill is to repeal the “check the box” rule that allow companies to use offshore subsidies as a front to avoid paying their fair share of taxes, saving an estimated $78 billion. Currently, businesses can make offshore subsidiaries and their passive income invisible for tax purposes. Read More

Last week, Congress failed to repeal the $85.3 billion in automatic, across the board spending cuts known as “sequestration,” and as a result, these spending cuts have begun to take effect.   Sequestration is the wrong way to go about reducing our nation’s budget deficit—it will hurt North Carolina’s economy, weaken the fiscal position of the state budget, and damage key public investments like K-12 education, job training, and food safety. 

And despite inflicting all this damage, sequestration targets the portion of the federal budget that contributes the least to national deficits, making it the wrong tool for achieving meaningful deficit reduction. Instead, Congress should take a balanced approach to deficit reduction that replaces the sequestration cuts for 2013 with equal amounts of new revenue and smart spending cuts.

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