At a time of record corporate profits, U.S. "corporate tax dodgers" are parking more of their profits offshore, taking advantage of tax loopholes to shield billions from U.S. taxes, according to new analyses in the Wall Street Journal and Bloomberg.
The WSJ looked at 60 U.S. companies that parked a combined $166 billion offshore last year, allowing 40% of their annual profits to escape U.S. taxes. In Bloomberg's analysis of 83 companies, there was a $183 billion expansion over the past year in non-U.S. holdings, for a combined total across the 83 companies of $1.46 trillion in offshore profits.
The trend is clear: figures from both papers show an increase from last year in offshore profits — up 15% using WSJ figures and a 14.4% increase using Bloomberg's data.
The companies with the five biggest offshore holdings on both the WSJ and Bloomberg lists are General Electric, Pfizer, Microsoft, Merck and Johnson & Johnson.
This tax avoidance is allowed, both papers explain, because of tax rules that 'incentivize' such practices; companies don't have to pay taxes on profits from these overseas subsidiaries if the money isn't brought back to the U.S..
Mike Lapham, director of the Responsible Wealth project at United for a Fair Economy, says this tax avoidance "shouldn't be surprising" because "these companies are doing what the tax system encourages them to do."
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Lapham points out that "the larger the corporation is, the more they benefit from public investments in research, infrastructure, regulations, and public education. Instead of skipping out on taxes, they should be paying their fair share toward those resources."
Further, some of these companies taking advantage of the corporate-friendly tax rules which have allowed over $1 trillion to get stashed in offshore profits are part of an effort designed to deliver austerity to the poor and middle class in the name of fixing the debt crisis.
"What makes this story especially obscene is that many of these companies, such as Honeywell and Microsoft, are leaders of the 'Fix the Debt' campaign, which is pushing for cuts to Social Security and Medicare as the solution to our fiscal challenges," says Sarah Anderson, who directs the Global Economy Project at the Institute for Policy Studies.
"Before they tell the rest of us to tighten our belts, they should look in the mirror and admit their own massive contributions to the national debt. Why should ordinary taxpayers have to sacrifice while highly profitable corporations are using accounting acrobatics and tax havens to avoid paying their fair share?" says Anderson.
Echoing Anderson, Sen. Bernie Sanders (I-Vt.) said at a press conference on Monday, "At a time when we have a $16.6 trillion national debt; at a time when roughly one-quarter of the largest corporations in America are paying no federal income taxes; and at a time when corporate profits are at an all-time high, it is past time for corporate America to contribute significantly to deficit reduction."