As You’re #StuckInTraffic, Don’t Get Stuck With A Bad Tax Deal

Isaiah J. Poole

Unless progressives intervene, a scandalous corporate tax ripoff could gain some serious momentum on Capitol Hill today when President Obama’s transportation secretary, Anthony Foxx, makes his scheduled appearance before the House Transportation and Infrastructure Committee to sell the administration’s roads and public transit spending plan.

That plan would allow corporations that have stashed profits overseas to avoid federal taxes to repatriate or “bring those taxes home” at a sharply reduced 14 percent tax rate (down from a statutory rate of 35 percent), with the proceeds being used to help fund transportation projects. Foxx is not only going before Congress to advocate for that proposal, but is planning to participate in a Twitter town hall afterward with Rep. Bill Shuster (R-Pa.), the chairman of the Transportation and Infrastructure Committee.

The goal is to turn a plan that should be considered politically outrageous into politically inevitable – unless, of course, concerned citizens act to make it politically toxic.

Foxx and Shuster plan to carry out the dialogue on Twitter using the hashtag #StuckInTraffic. If you believe that the nation shouldn’t be stuck with a corporate tax giveaway to give relief to travelers who are stuck in traffic, and that there is a better way to pay for the transportation improvements we need, weigh in today using the #StuckInTraffic hashtag.

Here are some suggested alternative messages, offered by our allies at Americans for Tax Fairness.

Yes, we do need infrastructure investments, but 14% rate proposal is only down payment. Repatriation is a boondoggle. #StuckInTraffic

Taxing offshore profits for Highway Trust Fund is a great idea, but 14% rate is too low. It loses more money than it makes. #StuckInTraffic

Closing offshore loopholes is much better than offering tax avoiding corporations a deal. This proposal is revenue negative. #StuckInTraffic

We’ve written a number of posts on the dangers of this tax scheme. Our co-director Robert Borosage calls it “the next corporate sting,” and here’s why:

Global corporations have managed to create a perverse tax dodge in the U.S. tax code. Any profits they make or report abroad can be squirreled away – deferred – tax-free until they are “repatriated” – brought back for use in the U.S. Large global corporations find creative ways to report billions of profits in tax havens like the Cayman Islands. Then they lobby fiercely for a one-time tax “holiday” to bring the money back home, promising it will produce jobs and investment. … Now some $2 trillion dollars resides sheltered from U.S. taxes, and the lobbying for another holiday has grown fierce. … The U.S. also has a large and growing public investment deficit. … But Republican legislators are so terrified by the anti-tax crusaders, they can’t even bring themselves to hike the gas tax at a time of plummeting gas prices to cover maintaining the roads.

Corporations want a tax holiday; the country desperately needs to rebuild its infrastructure. It didn’t take a rocket scientist to plot the new sting.

Sure enough, any opposition to the proposal among Democrats in Congress has been muted, even among progressive critics of corporate tax giveaways. In one sense that’s because the White House tax repatriation proposal demands more of corporations than what was demanded the last time corporations were offered a repatriation “tax holiday,” in 2004, or what’s being put on the table by congressional Republicans.

But it still sets the bar in the wrong place. Multinational corporations that have created elaborate schemes to shelter profits overseas to avoid paying taxes – even telling anyone who would listen that they are “obligated” to their shareholders to avoid paying these taxes – should by all rights be sanctioned, not given enticements. At the very least, we should be demanding that Congress reform the tax code so that corporations pay their fair share of taxes on the profits that they earned using the public infrastructure and public assets that our tax dollars pay for.

The Obama administration’s infrastructure proposal fails that test. In addition to the one-time discounted tax of 14 percent on profits held abroad, it would set a future 19 percent tax rate on foreign earnings that Bloomberg News warned “could give companies an incentive to move profits overseas” because that rate remains lower than even the 25 percent to which some Republicans have suggested cutting the corporate tax rate.

There are better ways to pay for the infrastructure investment we need – even the $1 trillion infrastructure investment proposal by Sen. Bernie Sanders (I-Vt.) that dwarfs the Obama administration proposal but comes closer to meeting what the country actually needs.

On Tuesday a group of experts that included Bill Parks, a retired professor of finance and entrepreneur, held a briefing on Capitol Hill to tout an alternative corporate tax system called “sales factor apportionment,” based on sales. Under the system the federal government would tax corporate profits based on the percentage of sales the corporation made in the United States, a figure that is easily obtained and one that multinationals would not be motivated to obfuscate. (Our Dave Johnson explains the plan further in this post.) Parks has argued that such a tax system would raise far more revenue for the federal government than the Obama administration’s plan.

Beyond corporate tax changes, the ranking Democrat on the House transportation committee, Rep. Peter DeFazio (D-Ore.) has proposed replacing the federal gasoline tax with a per-barrel wholesale tax on oil companies. The 18.4-cent-a-gallon gasoline tax levied at the fuel pump hasn’t increased since 1993, but raising it now is not viewed as a popular move by many leaders in Congress and is outright opposed by the Obama administration, so shifting the tax to the oil companies is a potentially attractive workaround – if it were not for the fierce opposition of the powerful fossil fuel lobby.

These are the kinds of ideas that should be debated by Congress, not a scheme that has We the People begging for scraps off the table of corporate tax gamesmanship. Tell Foxx and Shuster today that you are not only tired of being #StuckInTraffic, you are tired of being stuck with politics as usual that allows corporations to not pay the taxes they should.

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