The Price We Pay for Corporate Money In Campaigns

If you wonder what price we all pay for corporate money flooding political campaigns ($1.7 billion in 2014), see Exhibit A — the decision by pharmaceutical giant Pfizer to renounce its U.S. citizenship and become an Irish company in order to duck U.S. corporate income taxes.

Pfizer made no secret that its blockbuster $152 billion merger with Allergan, based in Dublin, was aimed at taking advantage of Ireland’s new 6.3 percent tax rate, well below the effective tax rate that U.S. multi-nationals pay at home.

As President Obama commented, such deals may seem unpatriotic but they’re legal. Pfizer’s is but the latest of 47 so-called “corporate inversions,” in Wall Street lingo, consummated over the last decade. American companies flip their legal home address without changing their CEO or their basic operations through foreign mergers that will cost Uncle Sam an estimated $41 billion in lost tax revenues over the next decade, dumping that burden on average taxpayers.

Steep Drop in Corporate Share of Tax Revenues

Inversions, promoted by Wall Street banks that pocketed $1 billion in fees, are the newest gimmick in a long-term trend that has eroded America’s corporate tax base. Since the 1950s, the corporate share of federal tax revenues has fallen steeply from over 30 percent to just 10 percent today – thanks, not only to a lower corporate tax rate but to $1.2 trillion in corporate tax loopholes passed by Congress.

Foreign tax havens have become the new norm for Corporate America. Major multi-nationals find financial hideaways like Bermuda, Puerto Rico or the Cayman Islands, where they can set up shell affiliates, often little more than a small office with a big bank account, where they can stash their overseas profits and escape having to pay U.S. taxes.

In 2014, that practice was so pervasive that nearly three-fourths of Fortune 500 companies booked profits to foreign tax havens, according to a study by Citizens for Tax Justice and U.S. Public Interest Research Group (PIRG). In all, U.S. companies were hoarding $2.1 trillion in profits offshore – enough to generate $620 billion in U.S. taxes if American companies had brought all their earnings back home to the United States.

» Continue reading at ReclaimTheAmericanDream.org.

Get updates in your inbox

Comments