TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Tuesday, February 5, 2013

U.S. PIRG: The State Revenue Cost of Offshore Tax Havens

USPIRG ChartU.S. PIRG, The Hidden Cost of Offshore Tax Havens: State Budgets Under Pressure from Tax Loophole Abuse:

Tax havens are countries or jurisdictions with minimal or no taxes. Corporations and individuals shift earnings to financial institutions in these countries to reduce their U.S. income tax liability—costing the federal government $150 billion in lost revenues each year.

Federal taxpayers are not the only victims of offshore tax havens. Tax havens deprive state governments of billions of dollars in badly needed revenues as well. Based how much income is federally reported in each state, and on state tax rates, it is possible to calculate how much each of the state governments lose as a result of offshore tax dodging. 

In 2011, states lost approximately $39.8 billion in tax revenues from corporations and wealthy individuals who sheltered money in foreign tax havens. Multinational corporations account for more than $26 billion of the lost tax revenue, and wealthy individuals account for the rest.

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Second Circuit Court of Appeals Judge Learned Hand wrote in Helvering V. Gregory in 1934: “Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.” I'm sure this applies to state taxes, too.

Posted by: M.A. Ward | Feb 5, 2013 12:36:48 PM

US PIRG is not getting its money's worth with these authors. They parrot and cite other studies that themselves are no better than guesses. The ignorance of the authors is best illustrated by the following quotation: "Income earned in the United States can be paid to these offshore entities, thereby avoiding U.S. taxes." p. 6. Someone needs to write an article really analyzing all the articles that make these unfounded claims. It points out that if you keep repeating something often enough, even though it is not true, people will believe it is an established fact. There is no empirical data showing how much tax revenue is actually lost to the so-called "tax havens."

Posted by: TexEcon | Feb 6, 2013 8:06:39 AM