Asbury Park Press

Tax Loopholes Let NJ Corporations Park $122B In Offshore Accounts, Report Says

Could pay for Sandy repairs

Asbury Park Press — Thursday, April 4, 2013

Written by
Dustin Racioppi

ASBURY PARK — While the blade of sequestration runs through the country, somewhere offshore there's enough money to fill the budget gaps back home, with enough left over to pay for repairs to damage by superstorm Sandy, according to new data by a public interest group.

A report released on Thursday, called "Picking Up The Tab 2013," shows that each year corporations and wealthy individuals dodge paying about $150 billion in taxes by parking their profits in offshore tax havens.

Corporations, including New Jersey giants such as Johnson & Johnson, account for $90 billion of that lost revenue — or enough to pay for the automatic budget cuts known as sequestration in effect right now, according to the report by New Jersey Public Research Interest Group, or NJPIRG. In 2012, five New Jersey corporations were among 92 Fortune 500 companies that had nearly $1.4 trillion in profits stored offshore, according to a March report by Citizens for Tax Justice in Washington, D.C. Click the thumbnail above to watch lawmakers discuss the report.

"On one side we see indiscriminate, across-the-board cuts into the budget, in every program, and on the other side we see $1.5 trillion in badly needed revenue lost in tax loopholes that allows those who have been successful to game the system and leave the burden with the rest of us," said U.S. Sen. Robert Menendez, D-N.J., who sits on the Senate Finance Committee.

In New Jersey, the average taxpayer would have to shoulder an extra $1,260 in taxes to make up for the revenue loss, and small businesses would pay an additional $3,941, according to the NJPIRG report. The state loses $2.8 billion in taxes each year, the report says. That money would pay for Sandy's damage to gas and electric utility systems, NJ Transit's trains and equipment and cover the storm's project drop in state revenues, according to the report.

It's all legal, too, with the right resources and tax code know-how.

Menendez, U.S. Rep. Frank Pallone, D-N.J., and Asbury Park Mayor Ed Johnson called for Congress to close those loopholes to avoid U.S. taxes.

"They're not breaking the law; they're taking advantage of the law," Menendez said. "It's a law that should be changed."

Menendez said a bill in the Senate to close "the most egregious loopholes," the Cut Unjustified Tax Loopholes Act, is stalled, but said there is push for corporate tax reform which, along with the budget process, may provide an opportunity to close the loopholes and in turn pull in more revenue.

New Jersey's heavy hitters in manufacturing and technology are listed among the culprits: Merck; Johnson & Johnson; Honeywell International, Cognizant Technology Solutions; and Becton Dickinson accounted for $122 billion in profits stored offshore in 2012, a 21 percent increase over 2011, according to New Jersey Citizen Action, the state's largest citizen watchdog group.

Johnson said the methods used by corporations and wealthy people to park their money offshore, away from the reach of the IRS, are "not right. That's not American."

"What is going on with this issue, the effect of this issue, directly effects Main Street, U.S.A. — in Asbury Park, in New Jersey and across this nation," Johnson said.

Jerome Beckman, the owner of Beckman's Asbury Park who hosted the Democratic trio at his Bangs Avenue store, can attest to that.

He lost his boardwalk shop in the Oct. 29 superstorm and is counting on the 100-day blitz of summer to help make up some of the losses due to Sandy. He doesn't have the opportunity to ship profits offshore.

"I play by the rules because I have to. I have the burdens of not only paying my store's bills, (but) paying my employees' paychecks, making sure they get paid and making sure everybody gets paid before I do, including paying my taxes," Beckman, 32, said. "When it comes to big corporations being able to hide their money, that money comes directly out of my pocket, that I have to cover. Because as a small-business owner, I have to cover everything else before I see any money."

Of course, there are loopholes for just about every tax bracket — homeowners, business owners, students. But Ann Vardeman, organizer for NJ Citizen Action, said those tax breaks are meant to help stimulate growth, not reap a bigger profit.

"The corporate tax loopholes aren't benefiting anyone except for corporate CEOs," she said. "What it's doing is detrimental to society. It's not benefiting society."

Pallone said that Congress — himself included — is responsible to renew its commitment to "real tax reform." He said that even though the corporate tax rate is 35 percent, because of loopholes many corporations are able to shave off another 10 percent to 15 percent.

"I don't want to see the corporate tax rate go down and the loopholes not be closed, because that just means more lost revenue and more of a burden on everyone else," Pallone said.

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