All of those hundreds of billions of dollars being deprived of productive use for the public, and that because of a few greedy corporate executives no less.
A new study reveals the extent to which companies are using tax havens to avoid U.S. taxes and undermines the case for any tax proposal that would allow companies to repatriate their U.S. profits at a special low tax rate.
In 2016, nearly three in four Fortune 500 companies maintained subsidiaries in offshore tax havens, according to “Offshore Shell Games,” an annual study of offshore tax avoidancereleased today by the U.S. PIRG Education Fund and the Institute on Taxation and Economic Policy. Fortune 500 companies’ offshore cash hoard now totals $2.6 trillion, a sum on which these companies are avoiding up to $752 billion in U.S. taxes.
Corporate tax avoidance is a central part of the current tax reform debate. Republican lawmakers have proposed not only to lower the statutory corporate tax rate, but also to allow corporations to repatriate offshore profits and pay just a fraction of the current statutory 35 percent corporate tax rate.
“Real tax reform would fix the deferral loophole, not reward companies for using the loophole to avoid taxes year after year,” said Richard Phillips, a senior policy analyst at the Institute on Taxation and Economic Policy. “Lawmakers shouldn’t be discussing how to sweeten the pot and give corporations a huge tax break that amounts to a huge financial reward for engaging in bad corporate behavior.”
The amount that these corporations will help the American public at a low repatriated rate is comparatively insignificant. This experiment was already run in the 2000s, and the corporations used most of the money for stock buybacks and other corporate malfeasance back then. As the same would happen today, it would be a far superior outcome for those profits to be taxed at a rate that’s actually fair and then used for productive investment in the public interest. An infrastructure project would be one of many sensible ideas.
Lower corporate tax rates aren’t going to lead to more productive investment either. The data from the last 7 decades proves that there’s no correlation between higher aggregate corporate profits and investment.
The effective corporate tax rate in the U.S. is also already about half of the statutory rate too.