For years, multinational corporations have avoided paying taxes they owe to the United States by booking profits to offshore tax haven subsidiaries.
Now, instead of closing the unfair loopholes that let corporations hoard profits abroad, President Trump and Congressional Republicans are poised to reward the biggest corporate tax shirkers with a “tax holiday” worth billions.
As passed by House Republicans, the tax bill reduces the corporate tax on offshore profits rate from 35 percent to 14 percent.
The result, as revealed in a sector-by-sector analysis by Public Citizen and ITEP:
$24 billion to Wall Street banks that hold $172 billion in profits abroad.
$42 billion to Big Pharma corporations that hold $290 billion in profits abroad.
$95 billion to Silicon Valley corporations that hold $502 billion in profits abroad.
The Senate bill, believe it or not, is even worse. It reduces the offshore corporate tax rate to 10 percent.
The idea Republicans are pushing is that offering corporations a one-time, low-rate “tax holiday” will spur them to bring their profits back into the U.S., where the money will be used to create jobs.
One big problem with this line of thinking is that the corporations benefiting from the tax cut already are incredibly profitable. Apple, the most profitable corporation in the world, holds a $252 billion offshore and would avoid a tax bill of more than $47 billion if the tax bill passes. Other major beneficiaries of the tax bill such as JPMorgan Chase, Wells Fargo, Bank of America, Microsoft and Citigroup recently topped the Fortune 500 “most profitable companies” list.
As the Economic Policy Institute’s Josh Bivens recently told NPR, “[W]e have exactly what the corporate tax cut is trying to engineer — really high post-tax profit rates. And yet it has not resulted in more investment. So the idea that we just want to do more of the same thing that has not spurred investment strikes me as not correct.”
Another problem is that this sort of “tax holiday” scheme has been tried before. As far as “creating jobs,” is concerned, it didn’t work. In 2004 President Bush offered corporations a 5.25 percent tax holiday on offshore profits. Despite the policy stating outright that it forbade companies from using the funds to enrich shareholders, a 2011 Senate study found that the companies that took advantage of the tax holiday accelerated their stock buybacks.
These companies also reduced, rather than expanded, their workforce.
Stock buybacks will enrich shareholders, a move that will disproportionally benefit the rich – who hold the vast majority of stocks.
There is no reason to believe that the current tax bill, which does not even attempt to stipulate how corporations spend this new largesse, would produce better results.
All told, Fortune 500 companies stand to receive a tax cut of $562 billion. That’s a tax cut so big, it could pay to repair 2017’s record-breaking worldwide hurricane damage and still have $192 billion left over.
There is nothing remotely populist about what this tax bill will do. It represents a vast transfer of wealth from taxpayer coffers and programs that benefit everyday Americans to Big Business and the superrich. The only thing about America that will be made greater from its passage is the already-great economic divide between the rich and the poor.
Tell your senators to oppose the tax bill. Dial 888-516-5820 to reach their offices and make sure your voice is heard.