56 Organizations Unite In Opposition To Schumer Corporate Tax Plan

Isaiah J. Poole

A broad coalition of progressive organizations is pushing back against the lawmaker in line to be the next Senate Democratic leader and a plan he has endorsed to overhaul the corporate tax rules.

The Campaign for America’s Future joined 55 other organizations in endorsing a letter to members of the Senate authored by Americans for Tax Fairness outlining objections to the tax reform framework offered by Sen. Charles Schumer (D-N.Y.) and Rob Portman (R-Ohio).

“While it is just a framework with many details yet to be filled in, the proposal appears to fail two principles of corporate tax reform,” the letter said. It would not increase the amount of revenue available for critical needs, and it would move the United States toward what’s known as a “territorial tax system,” which would provide “huge incentives for corporations to shift profits and jobs offshore at the expense of U.S. workers and communities,” the letter said.

Leading conservatives such as Rep. Paul Ryan (R-Wis.), the chairman of the House Ways and Means Committee, and big-business groups like the U.S. Chamber of Commerce favor a territorial tax system, in which multinational corporations are taxed only on profits the corporation books in the U.S. and is not taxed at all on profits “earned” outside U.S. borders. That would encourage corporations to continue to create offshore subsidiaries and use various tax avoidance schemes, the letter said.

The Schumer-Portman proposal would also “create a huge new tax loophole known as a patent or innovation box.” Essentially, corporate profits derived from intellectual property – which could include patents, trademarks and copyrighted material – would be taxed at a much lower rate than profits earned through other means. Several European Union countries already have patent box tax breaks in effect, and profits from at least some forms of intellectual property in those countries is taxed at rates of between 5 and 15 percent.

“One of our nation’s biggest offshore tax loopholes is the ability of corporations to characterize their income as derived from intellectual property,” the letter said – and often that intellectual property is shifted to offshore subsidiaries so that sales in the U.S. linked to that intellectual property are taxed overseas instead of the U.S. “Companies do not need yet another tax break on income from this source. Moreover, the patent box is an ineffective way to incent research because it is poorly targeted, and it provides a windfall for past research that needs no tax break,” the letter said.

The Schumer-Portman proposal gains its potency in part from Schumer’s liberal credentials. But the letter, signed by a cross-section of progressive and grassroots community organizations, labor groups and think tanks demonstrates that this proposal has no real support within the progressive base.

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