Senators Rand Paul (R-Ky.) and Barbara Boxer (D-Calif.) have teamed up and introduced a bill to let multinational corporations hiding profits in tax shelters off from paying most of the taxes they owe on those profits. In other words, they are offering companies a big, fat reward for coming up with tax schemes that cheat We the People out of a way to pay for the roads, schools, ports, military and the rest of the things (democracy) we provide these corporations to enable them to prosper.
And here’s a big question right now: Doesn’t this bill promising a “repatriation tax holiday” encourage even more companies to move jobs out of the country as fast as they can, so they can take advantage of the proposed tax holiday, too?
A loophole in our tax laws allows companies to “defer” paying taxes on profits made outside the U.S. until they repatriate – bring back to the U.S. – the money. Because of this, companies engage in all kinds of schemes and scams to get profits into offshore tax havens. American corporations are already holding as much as $2 trillion in already booked profits out of the country, to avoid the 35 percent tax they already owe on those profits. This means they owe up to $700 billion in taxes on profits they have already booked. They have used all kinds of schemes to make it look as if those profits were made outside of the country, including moving jobs, factories, profit centers and everything they can outside of the U.S.
If this bill passes, these companies can bring those profits back and pay only a 6.5 percent tax – up to $130 billion instead of $700 billion. This represents a $570 billion windfall for the giant corporations. This is $570 billion already owed on profits already booked, $570 billion that We the People are owed to pay for schools, roads and democracy. (And they complain about budget deficits! HA!)
Congress Already Did This Once With Disastrous Results
Congress gave corporations a repatriation tax holiday in 2004. The results were a disaster for the economy. Even worse, the previous tax holiday is the reason so many companies now move jobs and factories and profit centers out of the U.S.. They do this to hide profits offshore, waiting for the next tax holiday. This currently costs the country jobs, factories – and up to $700 billion in taxes due.
Americans for Tax Fairness (ATF) is a coalition of 425 national and state organizations that represent tens of millions of members. ATF was formed on the belief that the country needs comprehensive, progressive tax reform that results in greater revenue to meet our growing needs. ATF issued a statement blasting the proposal:
“The proposal from Senators Boxer and Paul appears to be the same failed tax giveaway that occurred a decade ago. It should be called the ‘Retread Act of 2015.’ Their plan would put a new tread on a failed tax loophole bill from the past. But it’s nothing but a flat tire for American families and small businesses.
“American taxpayers and Main Street businesses should not have to pick up the tab for the taxes owed by some of America’s richest companies – such as Apple, General Electric, Microsoft, Pfizer, Merck, IBM – that have the most untaxed profits sitting offshore. And our tax system should not be encouraging corporations to shift jobs or profits offshore, as this proposal would do. Untaxed offshore corporate profits have grown by 250 percent since the 2004 repatriation holiday in anticipation of this legislation.
The ATF statement refers to a report, Repatriating Offshore Funds: 2004 Tax Windfall for Select Multinationals, from the U.S. Senate Permanent Subcommittee on Investigations. A summary of the findings of the report (click through to the ATF statement for the details for each of these points):
- U.S. Jobs Lost Rather Than Gained.
- Research and Development Expenditures Did Not Accelerate.
- Stock Repurchases Increased After Repatriation.
- Executive Compensation Increased After Repatriation.
- Only a Narrow Sector of Multinationals Benefited.
- Most Repatriated Funds Flowed from Tax Havens.
- Offshore Funds Increased After 2004 Repatriation.
- More than $2 Trillion in Cash Assets Now Held by U.S. Corporations.
- Repatriation is a Failed Tax Policy.
How Many More Jobs Will We Lose Because Of This Proposal?
How many companies are already shifting even more jobs and profit centers out of the country because of this proposed tax holiday? Have we already lost 10,000 jobs since they announced it? And after this “holiday,” it will finalize it as the norm to keep jobs and production and profits centers out of the country to dodge taxes.
Here’s my alternative proposal: End this job-sucking “deferral” loophole by imposing a 5 percent per year surtax on profits kept offshore. If companies have a legitimate reason to keep the profits offshore, fine; they can pay the 5 percent each year and then the 35 percent when they bring it back. If companies are holding profits out of the country just to dodge taxes, fine; after seven years they will have paid 35 percent – and will still owe 35 percent. This helps We the People fund our democracy.
Meanwhile, the Congressional Progressive Caucus, in its “Progressive Principles for Tax Reform,” recommends “either ending deferral (and the excessive tax avoidance this encourages) or adopting a global minimum tax (rendering deferral largely irrelevant).”