You may have heard about all the giant multinational corporations that have moved jobs, factories and profits out of the country in order to avoid paying the taxes they owe. You may have heard that we haven't been maintaining (never mind modernizing) our infrastructure because the government "is broke."
A bill before Congress would give these tax dodgers a huge break and let them bring the money back without paying their taxes, as long as they loan some of the money for use rebuilding our infrastructure. This would make the honest, patriotic companies that kept jobs, production and profit centers in the US look like suckers.
The Partnership to Build America Act (sponsored by Sen. Michael Bennet (D-Colo.) and Rep. John Delaney (D-Md.)) would let U.S. multinational corporations bring home offshore profits tax-free if they use some of the money to buy bonds in an "infrastructure bank." This bank will help fund badly needed infrastructure projects. The funding is badly needed because Republicans have been obstructing Congress from fully funding needed infrastructure projects.
The idea apparently is that these companies are too politically powerful for the government to make them bring the money back and pay their taxes as they are supposed to, so let's at least try to get something out of it. In this case, instead of using the tax revenue these companies owe to pay for modernizing our infrastructure, let's give these companies an incentive (bribe them) to buy bonds and use that money to repair our infrastructure. (Note that this means we pay them interest and then later give them the money back.)
How much would this cost us? Thomas L. Hungerford at the Economic Policy Institute took a look at this proposal and reports:
It would be much cheaper from a federal budgeting perspective to simply finance the bank’s start-up with a direct appropriation of funds. To meet the $50 billion funding goal through the bills’ proposed mechanism would require the federal government to grant about $70 billion to $100 billion in tax breaks to multinational corporations.
Citizens For Tax Justice points out that this plan rewards the very tax-dodging companies that are part of the reason the U.S. is running a budget deficit.
The proposal would provide the biggest benefits to the most aggressive corporate tax dodgers. Often, an American corporation has offshore profits because its offshore subsidiaries carry out actual business activity. But a great deal of the profits that are characterized as “offshore” are really U.S. profits that have been disguised through accounting gimmicks as “foreign” profits generated by a subsidiary (which may be just a post office box) in a country that does not tax profits (i.e., an offshore tax haven). These tax haven profits are the profits most likely to be “repatriated” under such a proposal ...
... profits in tax havens get a bigger tax break when “repatriated” under such a tax amnesty. The U.S. tax that is normally due on repatriated offshore profits is the U.S. corporate tax rate of 35 percent minus whatever was paid to the government of the foreign country. Profits that American companies claim to generate in tax havens are not taxed at all (or taxed very little) by the foreign government, so they might be subject to the full 35 percent U.S. rate upon repatriation — and thus receive the greatest break when the U.S. tax is called off.
The tax-dodgers are bribed with additional incentives to please let us use some of this money to maintain our infrastructure. The worst ones get them most from this. Companies that did the right thing lose out. This is a classic example of how the wealthiest rig things in their favor. This hurts small businesses here, hurts citizens and drains the government (We the People) of funding for our schools, etc.
So let's see what we have here.
- The "deferral" loophole lets companies avoid paying taxes on profits made outside the country until they bring the profits back.
- Giant multinational corporations have moved jobs, production and profit centers out of the country to take advantage of this loophole and avoid paying their taxes.
- These companies are holding between $1.5 and $2 trillion outside of the country, away from investment in the U.S. and from their shareholders.
- If the full amount currently deferred were brought back, it could bring in as much as $525 billion-$700 billion of tax revenue that We the People could use to get things done that really, really need to get done, such as modernizing our infrastructure, hiring teachers, building high-speed rail, and retrofitting buildings to be energy-efficient.
- Companies that keep jobs, production and profit centers inside the U.S. don't get this huge tax loophole and look like suckers for helping their country.
- If we let these companies get away with this, of course there will be terrific pressure to do it even more, and for more companies to join in moving jobs, production and profit centers out of the country.
This is a proposal to let giant corporations off the hook from taxes if only they'll please loan (not give but loan) some money so we can have an infrastructure bank and maybe repair some bridges, and we'll give them up to $100 billion in tax breaks. This is instead of just making them pay their taxes...
Who is supposed to be the boss of whom in this country? (Yes, I said "whom.")
