Tax policy can be a mind-numbing discussion, but it need not be.  Through all of the terms and legalities, the main question to keep in mind is who wins and who loses.  The currently available details of the latest Republican Congressional plan paint a clear portrait of the winners:  billionaires, millionaires and big corporations. The losers are everyone else.

It is widely known that many large, publicly traded corporations, including some doing business here in Colorado, dodge their tax responsibilities by moving their profits offshore. The mechanisms are often varied and complex, but usually boil down to opening a shell corporation with a post office address in a country like Bermuda or the Isle of Man, creating a fake product (“intellectual property” is a favorite) and then conducting a sham transaction between the real corporation and the shell corporation equaling the real corporation’s tax liability. Then, presto, no federal or state taxes are owed.

This corporate tax avoidance technique, which puts Main Street businesses at a big disadvantage because they don’t have the lawyers and accountants to do the same thing, is well-known to federal and state tax authorities.  Congress has unsurprisingly failed to address the issue, and bills introduced by myself and other state legislators to close the loophole in Colorado have been killed by the corporate lobby in the Republican-controlled state Senate.

Defenders of the practice claim that if the corporate tax rate in this country were reduced, these corporations would do the right thing and pay federal and state income taxes on their profits.  That’s baloney.  Large multi-national corporations with the resources and desire to hide profits overseas will still do so until they are told they cannot.  Lowering the corporate tax rate without closing this massive loophole just means there will be a few less shell companies headquartered inside Bermudan post office boxes in the future.

Even worse, current discussions contemplate an amnesty period granted to these same tax-dodging corporations that would allow them to bring the money back to their real domestic companies at the lower rate and without any penalty for hiding it in the first place.  Rewarding bad behavior is no way to prevent it from happening again.

If Congress does change the tax code during this session – and it is far from certain that will happen – it is imperative that this loophole be closed.  Each year about $90 billion in federal revenue and $100 million in Colorado revenue are lost to this corporate dodge.  Imagine the roads we could fix and schools we could support if these corporations paid income taxes just like everyone else.

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