Coddling the tax-shelter thieves

In the end, it's not the big, bad taxman that corporate tax cheats are pulling a fast one on. It's you and me.

By Arianna Huffington
Published July 23, 2003 5:47PM (EDT)

All across corporate America, high-priced accountants are hard at work helping companies avoid billions in taxes by hiding profits in a host of tax-sheltering schemes. No summer vacation at the beach reading trashy actuarial tables for these guys.

And they're doing a bang-up job: Corporations are giving 30 percent less of their profits to the taxman than they did 20 years ago. Meanwhile, all across the country state governments, facing the biggest budget crisis since the Great Depression, are slashing programs and cutting services.

Gee, do you think there might be a connection? You can bet your vanishing after-school care, prenatal health program and local law enforcement service there is.

Corporate tax shelters robbed states of $12.4 billion in desperately needed revenues in 2001, a figure representing more than a third of the money corporations rightfully owed, according to a study released last week by the Multistate Tax Commission, a nonpartisan coalition of state taxing authorities. Companies sheltering their assets overseas are draining an additional $70 billion a year from the federal treasury -- funds that often make their way back to states through programs such as Head Start and AmeriCorps.

Yet as damning as those statistics are, they're still just abstract figures. To really understand the devastating impact these lost revenues are having, we need to put flesh and bone to the numbers.

Take California: The Golden State lost an estimated $1.34 billion in corporate tax revenue because of tax shelters, according to the commission. That might not seem like that much to a state facing an elephantine $38 billion budget shortfall, but it means specific cuts to specific programs that affect hundreds of thousands of people.

For example, just $520 million of the $1.34 billion the tax dodgers kept for themselves would make it possible for the state to avoid the closure of -- or severe cost-cutting at -- up to 350 nursing homes. Just $380 million would prevent the loss of childcare and day-care services for 429,000 children. And just $600 million would make it unnecessary to raise the entry age for kindergartners -- a proposed change that will keep 110,000 children from starting school in the fall.

Just $18 million of the lost $1.34 billion would allow California officials to fully fund the California Arts Council, the 27-year-old agency that brings artists, writers and performers into the state's public schools. Instead, the Arts Council is on the budget chopping block.

And the same sort of pain being felt in California is being meted out across the country, with beleaguered state legislatures forced to eliminate services that could easily have been funded by lost revenues.

In Florida, which lost $554 million to tax shelters in 2001, just $7.7 million would have saved a program that provided glasses and hearing aids for low-income people. In Kentucky, which lost $150 million to tax shelters, $2.6 million would have allowed Gov. Paul Patton to leave behind bars the 883 prison inmates he released early in a desperate effort to balance the state's budget. I suspect that the 25-year-old woman who was raped by one of these freed inmates three days after his release would have considered that $2.6 million well spent.

And the list goes on of vital programs and services cut or eliminated that could have been saved had corporate America paid what it owed.

It's time for the Internal Revenue Service to stop coddling corporate crooks and start going after tax-shelter thieves with a vengeance. To do any less is a slap in the face of all the hardworking taxpayers who, however grudgingly, pay their fair share. Wealthy corporations must be forced to do the same. Because, in the end, it's not the big bad taxman these corporate tax cheats are pulling a fast one on. It's you and me.

Arianna Huffington

Arianna Huffington is a nationally syndicated columnist, the co-host of the National Public Radio program "Left, Right, and Center," and the author of 10 books. Her latest is "Fanatics and Fools: The Game Plan for Winning Back America."

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