Cracking down on U.S. companies and individuals who funnel income to offshore tax havens to avoid paying U.S. taxes is on just about every expert's list of needed federal tax reforms.
The use of these offshore tax havens also tops just about every struggling taxpayer's list of the major outrages of the U.S. tax system.
Google, Apple, ExxonMobil, Goldman Sachs, Microsoft, Wells Fargo ... these are just a handful of the major companies that avoid U.S. taxes by shifting profits to countries where they pay little or no tax.
The loopholes that allow this cost the federal government approximately $150 billion a year - more than enough to cover all the controversial spending cuts scheduled to take effect March 1, according to the New Jersey Public Interest Research Group.
But you probably already know much of that.
What you probably don't realize - and what NJPIRG has pointed out in a valuable new report - is that these companies are also cheating the states they are based in out of an additional $40 billion in lost tax revenue.
And according to NJPIRG, New Jersey ranks third - behind California and New York - in the amount of state tax revenue lost to offshore tax havens.
Sitting down? These offshore havens cost New Jersey $2.8 billion in 2012, NJPIRG said.
Kind of brings the problem home, doesn't it? Can you imagine the bridges in New Jersey that could be fixed, the schools that could be improved, the Hurricane Sandy victims who could be helped if the state had that $2.8 billion?
The companies that use offshore tax havens note that what they are doing is perfectly legal. The question, of course, is why we, as a nation, allow it to be legal.
"Tax dodging is not a victimless offense. When corporations skirt taxes, the public is stuck with the tab. And since offshore tax dodgers avoid both state and federal taxes, they hurt everyday taxpayers twice," said Peter Skopec of NJPIRG.
The study notes that Congress seems unable and/or unwilling to address the various loopholes that make all this possible. But, NJPIRG says, individual states can act to lessen the amount of revenue they lose to offshore tax havens.
NJPIRG's main suggestion is for states to "decouple" their tax systems from the federal system. Most states use the same definition of income as the federal tax code, so they lose money when companies avoid reporting income to the federal government. "Decoupling" New Jersey's definition of taxable income from the federal definition would close the loophole for state taxpayers.
Of course, we're constantly told that New Jersey's existing corporate tax structure is so burdensome that it drives corporations from the state. Making it more difficult for New Jersey companies to use offshore tax havens would certainly increase those complaints. That's why federal reform would be a better idea. At some point, the nation must recognize that the use of offshore tax havens is not just an issue of fairness or even patriotism. Allowing some to avoid paying so much in taxes also dangerously undermines the very legitimacy of our government.