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How Obama can close those tax loopholes

By Conor Williams
Friday, February 11, 2011; 4:50 PM

This week's coverage of President Obama's speech at the U.S. Chamber of Commerce largely portrayed him as a chastened progressive crusader. With hat in hand and downcast eyes, the president walked across Lafayette Park and assured American corporate leaders that he was ready to play nice.

Tired of "outdated and unnecessary regulations," corporate America? We'll back off. Might you consider spending some of the "nearly $2 trillion sitting on [your] balance sheets" to hire a few Americans off of our unemployment rolls? We'll call you "corporate patriots!"

So what does this mean for the president's stated goal to eliminate tax loopholes and subsidies that allow many American corporations to pay much lower taxes than they would otherwise? Industry relies on the nation's infrastructure, political institutions and much more. In last month's State of the Union address, Obama insisted that American business should start paying its share. After all, while American corporations report near-record profits, many unemployed Americans are still waiting for their chance at economic recovery.

So how to make the case? The president might look across the Atlantic -- in Britain, a group called U.K. Uncut has been protesting government austerity cuts in an especially promising way. It seeks out corporations and individuals that avoid paying taxes, calculates how much their taxes would be without loopholes, and then highlights programs that could be saved if they paid their share. Cellphone giant Vodafone recently settled a tax bill of 6 billion pounds -- about $9.6 billion -- for 1 billion pounds, or about $1.6 billion. Meanwhile, the British government cut $11.2 billion in public services to the nation's poor. So U.K. Uncut shut down a number of Vodafone's stores with sit-in protests.

Sir Phillip Green heads a number of British retail outlets and is one of the country's richest men, but in 2005 he managed to avoid the equivalent of $455 million in taxes via some borderline legal financial jujitsu. This didn't stop Britain's Conservative government from asking him to provide advice on spending cuts. In response, U.K. Uncut shut down some of Green's stores to highlight how his unpaid taxes could cover the salaries of 9,000 National Health Service nurses.

While U.K. Uncut is a grass-roots program (and American progressives would do well to work along similar lines -- I'm looking at you, Coffee Party), there's no reason that the president couldn't use these sorts of arguments to shape the political agenda in 2011.

Imagine if, every few days, the White House announced something like this: "This year many big oil corporations recorded record profits (ExxonMobil reported over $30 billion in earnings), while American taxpayers provided them $4 billion in tax subsidies. If Congress acts to stop these fiscally irresponsible programs, we could use this money to double Race to the Top education funding."

Or how about this? "Under current tax law, U.S. corporations may defer taxes on their offshore profits until they return these profits to the U.S. The deferral makes it much easier for them to avoid taxation altogether. Citizens for Tax Justice estimates that adjusting this policy could net around $200 billion through 2015, enough money to bring wireless broadband to every American household and fund high-speed rail development for several years."

And then on a really cranky day: "If adopted, GOP Rep. Paul Ryan's 'Roadmap for America's Future' would dramatically slash corporate taxes and decrease federal revenue by $183 billion if enacted this year. To avoid more deficit spending under this scenario, we'd need dramatic cuts -- like eliminating the departments of State, Interior and Veterans Affairs."

When asked, around 70 percent of Americans reliably answer that corporations pay too little in taxes. A strategy calling attention to corporate tax avoidance could drum up support for the tax reforms that Obama has been pushing since arriving in office. A steady diet of fiscal facts would go a long way towards marginalizing GOP posturing. While the president would be fighting corporate lobbyists and the inclinations of many members of Congress, he'd have the clear moral and fiscal high ground, which might just be what he needs to pass some of these reforms.

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