As a small business owner, I have some advice for the Congressional leaders coming to Tennessee to talk tax reform. Let's get serious about closing the tax loopholes that give big corporations big tax breaks and undermine small businesses and our communities.
House Ways and Means Committee Chairman Dave Camp (R-MI) and Senate Finance Committee Chairman Max Baucus (D-MT) will be visiting FedEx facilities in Memphis as part of their national tax reform tour. FedEx is a surprising choice of venue.
Over the last five years, FedEx has reported $9 billion in U.S. profits to shareholders but it paid an effective tax rate of just 5.2 percent on these profits. FedEx, like a lot of big corporations, want other taxpayers to pick up their tab for the roads, bridges, airports and other public infrastructure and services that FedEx depends on.
The average large corporation paid an effective corporate tax rate of just 12.6 percent according to a recent report by the Government Accountability Office. This rate is lower than most small business owners pay on their far more modest incomes.
There are dozens of corporate loopholes in the tax code. Many of them have no positive value for our country. Among the most egregious are accounting loopholes that allow American corporations to shift their profits earned in the U.S. to nations which impose little or no taxes on that income. This tax loophole costs the U.S. Treasury an estimated $90 billion a year. That's nearly $247 million every day of the year.
Many other small business owners agree with my concerns. Ninety-one percent of small business owners said that it is a problem when big businesses use accounting gimmicks to avoid paying taxes, according to a national 2012 scientific poll sponsored by the American Sustainable Business Council. A majority of the poll respondents were Republicans.
Big business tax dodging tilts the playing field against small business and undermines job creation and our communities.
Rather than preventing this tax dodging, some in Congress would rather talk about granting permanent tax incentives for that type of behavior. Chairman Camp, for instance, is a leading advocate for switching to a territorial tax system, which would exempt all offshore earnings from U.S. taxes, including U.S. profits shifted overseas through the magic of accounting tricks. That would open the floodgates to more U.S. profits flowing out of America.
Holes in the tax code are causing holes in our communities. When large, profitable businesses use loopholes to avoid their taxes, our communities are left to face the loss of public services upon which we all depend.
Cuts like those imposed by the federal sequester make it harder to envision a brighter future for the people of Tennessee. Our crumbling infrastructure from the last century is making us less competitive in this century. Cuts to Head Start have eliminated slots for our children to get a positive jump on their education. Cuts to Meals on Wheels and other elder nutrition programs have literally taken food off the tables of those who have worked hard all their lives and now need a little help. More than 7,000 civilian Department of Defense employees serving in Tennessee have experienced the loss of pay due to furlough days.
We can do better than this.
Big businesses need to step up and pay their fair share of the costs our government incurs to provide things like schools, roads and airports, which not only serve firms like FedEx, but all our businesses. In the 1950s, corporate taxes accounted for nearly one-third of federal government revenue; last year, they accounted for less than 10 percent.
We need corporate tax reform that closes the tax loopholes that undermine our tax base and leave holes in our communities.
Howland is President and CEO of Ibis Communications, Inc. in Nashville.
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