Head Smacker: What Could We Do with $695 billion?
Imagine what our country could do with an additional $695 billion.
Imagine the number of schools we could build. The number of teachers we could hire (and the decent salaries we could pay!) The number of child care and early childhood education slots we could fill. Imagine how we could combat poverty, eliminate childhood hunger, expand access to higher education.
Instead, we’re letting big corporations dodge $695 billion in taxes.
A new report released by Citizens for Tax Justice (CTJ), a CHN affiliate, finds that Fortune 500 companies are avoiding up to $695 billion in U.S. federal income taxes by holding $2.4 trillion of “permanently reinvested” profits offshore.
As CTJ notes, it has been well documented that major U.S. multinational corporations are stockpiling profits offshore to avoid U.S. taxes. Congressional hearings have raised awareness of tax avoidance strategies of major technology corporations such as Apple and Microsoft, but the CTJ report shows that, in fact, a diverse array of companies are using offshore tax havens, including the pharmaceutical giant Amgen, apparel manufacturers Levi Strauss and Nike, the supermarket chain Safeway, the financial firm American Express, banking giants Bank of America and Wells Fargo and even more obscure companies such as Advanced Micro Devices and Symantec.
CTJ says there are two reasons why Congress should promptly address this problem. First, a large number of the biggest corporations appear to be increasing their offshore cash substantially. Seventy-nine of the companies CTJ studied increased their declared offshore cash by at least $500 million each in the last year alone. Twelve particularly aggressive companies each increased their permanently reinvested foreign earnings by more than $5 billion in the past year.
Second, companies are aggressively seeking to permanently shelter their offshore cash from U.S. taxation by engaging in corporate inversions through which companies acquire smaller foreign companies and reincorporate in foreign companies, thus avoiding most or all U.S. tax on their profits.
CTJ recommends that Congress should end “deferral,” i.e., repeal a rule that indefinitely exempts offshore profits from U.S. income tax until these profits are repatriated, or brought back to the U.S. Ending deferral, according to CTJ, would mean that all profits of U.S. corporations, whether they are generated in the U.S. or abroad, would be taxed by the U.S. in the year they are earned. Of course, American corporations would continue to receive a foreign tax credit against any taxes they have to pay to foreign governments, to ensure profits are not double-taxed.
If U.S. taxpayers could recoup even a hefty portion of the $695 billion in lost treasure, just imagine how significantly we could invest in human needs.
You can read the CTJ report here.