While Mitch McConnell's Senate is on recess this week, the House is in session and is taking up a bill making changes to the Paycheck Protection Program (PPP) to make it more flexible and a better fit for small businesses, including extending the deadline for paying back the loans, allowing a larger percentage to be spent on overhead as opposed to payroll, and giving businesses 24 weeks as opposed to eight to use the funds for rehiring workers, until June 30. (Disclosure: Kos Media received a Paycheck Protection Program loan.)
That's all good. They need to do more in general, and more in this program. Like tightening language to make sure that businesses receiving the loans actually pay taxes in the U.S. One of the businesses that received more than $9.4 million in a PPP loan last month is Zagg Inc. It's a Utah-based company that makes accessories for mobile devices. It's a big, profitable company, making $6 million in profit in 2019, Reuters found. However, it paid no taxes in 2019, getting $3.3 million in tax refunds and another $7 million in tax credits. The company has avoided paying U.S. taxes by channeling its profits offshore in Ireland and the Cayman Islands. It's not the only company Reuters discovered that has received the loans—funded by taxpayers—that has avoided paying U.S. taxes.
Of just over 100 publicly traded companies that have each received more than $4 million in loans from the program, a dozen of them "recently used offshore havens to cut their tax bills, the analysis found. All together, these 12 received more than $104 million in loans from U.S. taxpayers. Seven of them paid no U.S. tax at all for the past year."
Among those publicly traded companies that each got at least $4 million in PPP funds, "Reuters found some 46 paid no U.S. corporate tax for the last year." This is perfectly legal. Companies are not required to pay any more taxes than the tax code says they must. The loopholes that are in the law for U.S. corporations are there to be used, and the law creating PPP and the rules and regulations governing it don't require that the companies receiving the money pay taxes. Companies receiving the loans do promise that the money will be used to pay employees who live in the U.S.
That doesn't mean it's not shitty to be capitalizing on the backs of taxpayers in this pandemic when you yourself haven't paid into that pot of money. It's not to say any of Zagg's employees—or the employees of any of the other dozens of companies—don't deserve to have their livelihoods secured. It’s this: "it's a mistake to let companies not paying their fair share of taxes reap further gains from the American taxpayer." That's from Zoe Reiter, director of civic engagement at Washington D.C.-based watchdog group Project on Government Oversight.
Or as Sen. Sheldon Whitehouse, Democrat from Rhode Island, says: "This pandemic has laid bare a corporate culture in large companies to avoid paying taxes in profitable years but come to the government for handouts in a crisis." The tax code needs to be reformed, and that's a longterm project. In the immediate term, either Congress or Treasury Secretary Steven Mnuchin could make sure that the rules are tightened to restrict this aid to companies that pay their damned taxes.