Corporate Tax Break Scheme Is Gaining A Momentum We Must Stop
There is no real argument over whether the nation needs to do more to improve its infrastructure - its transportation, water, power and information networks. But there is an argument over how best to pay for it all - and that argument is increasingly turning in a dangerous direction.
There is no real argument over whether the nation needs to do more to improve its infrastructure - its transportation, water, power and information networks. But there is an argument over how best to pay for it all - and that argument is increasingly turning in a dangerous direction.
Financially stressed working-class households who are at best treading water, if not actually sinking, in today's economy aren't eager to dig deeper into their own pockets to foot the bill. That's even more true of the plutocrat class, which has an army of lobbyists at the ready to shut down any suggestion that those who arguably would benefit the most from such things as better roads and public transportation should shoulder the larger share of the load.
Politicians of both parties in Washington are therefore increasingly relying on one of the schemes in the voodoo economics toolbox: give corporations hoarding money overseas to avoid taxation a form of tax holiday in exchange for increased corporate funding for infrastructure.
The Bond Buyer financial news site reports that Sen. Rand Paul (R-Texas) and Sen. Barbara Boxer (D-Calif.) are close to agreeing on a plan that would give multinationals a deep tax reduction on money they currently have stashed overseas if they bring the money back into the United States, also known as repatriation. Money collected would be deposited into the Highway Trust Fund, which is dedicated to paying for federal transportation projects.
Paul's promoting of this idea is not new; he had a bill last year that would have permanently cut the tax rate on profits corporations hold overseas, with the funds going into an emergency fund for what it considered high-priority highway projects. But his collaboration with Boxer is likely to give the idea more political momentum.
Meanwhile, the chairman of the House Transportation and Infrastructure Committee, Rep. Bill Shuster (R-Pa.), told the U.S. Conference of Mayors last week that raising the gasoline tax to pay for transportation improvements - the most logical near-term solution since that tax hasn't been raised in almost 22 years - is off the table in his committee. Instead, "the number one source that's being talked about is this repatriation of funds," he said, according to The Hill newspaper.
Rep. John Delaney (D-Md.) is a leading proponent of a repatriation-for-transportation-funding scheme. In December he filed a bill expected to be reintroduced this year that would allow multinational corporations to bring back overseas profits at a tax rate of 8.75 percent instead of the current statutory tax rate of 35 percent. The revenue collected would be placed in the Highway Trust Fund and in a $50 billion America Infrastructure Fund, which would be used to leverage up to $750 billion worth of state, local and private funding for infrastructure projects around the country.
With the White House giving its tacit blessing to such schemes while refusing to support proposals to raise funding in other ways, tapping profits now held overseas at a deeply discounted tax rate is becoming the default position for how to begin covering a more-than-$1 trillion infrastructure investment deficit.
But is rewarding tax avoidance really the way to fund our public infrastructure needs?
The biggest problem with the Delaney proposal, and the similar proposal from Paul, is that "it would allow companies such as Apple and Microsoft, which have parked hundreds of billions of dollars of U.S. profits in offshore tax havens, to pay a U.S. tax rate of no more than of 8.75 percent, instead of the more than 30 percent tax they should pay on these profits," says an analysis by Citizens for Tax Justice.
These profits - more than $2 trillion - are usually laundered through foreign subsidiaries in low-tax or no-tax countries in ways designed to avoid U.S. taxes. That can be done as simply as having that online purchase you think you are making through an American-based company actually handled by a Swiss or Irish subsidiary, or by transferring a patent to an overseas subsidiary so that revenues on licensing that patent flow through the subsidiary. Sometimes, the money isn't even actually overseas, but is deposited in U.S. banks and is being used for domestic purposes. In any event, regardless of where the money ends up being deposited, it is not "trapped overseas," as corporate lobbyists and their supporters in Congress often say; it's just that they don't want to pay a higher tax on that money.
The last time corporations got a repatriation tax holiday in exchange for the promise to use the profits in job-creating investments, in 2004, corporations instead ended up using the money brought back into the country to boost shareholder dividends and buy back stock (which drives up stock prices and, often, the compensation of CEOs). There is little reason to believe that the same thing wouldn't happen again in 2015.
Setting a bargain-basement tax rate for profits booked through foreign subsidiaries serves as nothing more than an incentive for corporations to escalate the schemes - or a wedge to convince lawmakers that if an ultra-low corporate tax rate is good for profits repatriated from overseas, perhaps all corporate profits should be taxed at that rate.
In any event, it is the rest of us who end up being the losers. When multinational corporations don't pay their fair share in taxes, the rest of us have to make up the difference - or suffer the inability to pay for the things that we need, like good roads and public transportation. That includes businesses who don't have the capacity to set up the fancy tax dodges that their competitors use.
What we need is honest tax reform that makes corporations and the wealthy pay their fair share, closing the door for good on the loopholes and schemes they use to avoid paying taxes. We also need an honest and equitable way to pay for the infrastructure improvements we need. Both are possible, but not without considerable heat from an aroused public. Congress will have to decide this year how it will pay for a multiyear transportation bill. We can't let the default option be coins from the table of corporate tax avoidance.
We are at a crossroads
This country and this world are at a monumental crossroads. In a few short weeks, US voters will have an opportunity to beat back the forces of fascism and confront the billionaires who are rigging the economy, our media system, and our democracy, making it increasingly impossible for ordinary people to get by. We’re not just talking about the election. We’re talking about what must be done once these fascist elements are vanquished from power. We need a bolder set of solutions than what either major party has so far been willing to offer and a working-class movement ready to fight like hell for it. Trump didn't emerge from nowhere. The conditions that fueled MAGA authoritarianism were created by decades of radical neoliberal economic policies and a corrupt political system dominated by corporate interests. They slashed taxes on the super-rich, promising that the benefits would trickle down. They said giveaways to the corporate titans would make life more affordable for the rest of us. It was all bullshit. And when a bitter, betrayed populace searches for someone to blame, right-wing demagogues have little trouble finding scapegoats. People know when they're being lied to, but you won't hear any of this from the corporate media. Only independent journalism—powered and funded by people who believe in building a better world—can deliver truly trustworthy daily news. Our Fall Campaign is underway, and we need your help. To power our newsroom through the rest of the year, we need to raise $125,000 by midnight on October 31. So if you share our vision, please contribute whatever you can to sustain our work. |
There is no real argument over whether the nation needs to do more to improve its infrastructure - its transportation, water, power and information networks. But there is an argument over how best to pay for it all - and that argument is increasingly turning in a dangerous direction.
Financially stressed working-class households who are at best treading water, if not actually sinking, in today's economy aren't eager to dig deeper into their own pockets to foot the bill. That's even more true of the plutocrat class, which has an army of lobbyists at the ready to shut down any suggestion that those who arguably would benefit the most from such things as better roads and public transportation should shoulder the larger share of the load.
Politicians of both parties in Washington are therefore increasingly relying on one of the schemes in the voodoo economics toolbox: give corporations hoarding money overseas to avoid taxation a form of tax holiday in exchange for increased corporate funding for infrastructure.
The Bond Buyer financial news site reports that Sen. Rand Paul (R-Texas) and Sen. Barbara Boxer (D-Calif.) are close to agreeing on a plan that would give multinationals a deep tax reduction on money they currently have stashed overseas if they bring the money back into the United States, also known as repatriation. Money collected would be deposited into the Highway Trust Fund, which is dedicated to paying for federal transportation projects.
Paul's promoting of this idea is not new; he had a bill last year that would have permanently cut the tax rate on profits corporations hold overseas, with the funds going into an emergency fund for what it considered high-priority highway projects. But his collaboration with Boxer is likely to give the idea more political momentum.
Meanwhile, the chairman of the House Transportation and Infrastructure Committee, Rep. Bill Shuster (R-Pa.), told the U.S. Conference of Mayors last week that raising the gasoline tax to pay for transportation improvements - the most logical near-term solution since that tax hasn't been raised in almost 22 years - is off the table in his committee. Instead, "the number one source that's being talked about is this repatriation of funds," he said, according to The Hill newspaper.
Rep. John Delaney (D-Md.) is a leading proponent of a repatriation-for-transportation-funding scheme. In December he filed a bill expected to be reintroduced this year that would allow multinational corporations to bring back overseas profits at a tax rate of 8.75 percent instead of the current statutory tax rate of 35 percent. The revenue collected would be placed in the Highway Trust Fund and in a $50 billion America Infrastructure Fund, which would be used to leverage up to $750 billion worth of state, local and private funding for infrastructure projects around the country.
With the White House giving its tacit blessing to such schemes while refusing to support proposals to raise funding in other ways, tapping profits now held overseas at a deeply discounted tax rate is becoming the default position for how to begin covering a more-than-$1 trillion infrastructure investment deficit.
But is rewarding tax avoidance really the way to fund our public infrastructure needs?
The biggest problem with the Delaney proposal, and the similar proposal from Paul, is that "it would allow companies such as Apple and Microsoft, which have parked hundreds of billions of dollars of U.S. profits in offshore tax havens, to pay a U.S. tax rate of no more than of 8.75 percent, instead of the more than 30 percent tax they should pay on these profits," says an analysis by Citizens for Tax Justice.
These profits - more than $2 trillion - are usually laundered through foreign subsidiaries in low-tax or no-tax countries in ways designed to avoid U.S. taxes. That can be done as simply as having that online purchase you think you are making through an American-based company actually handled by a Swiss or Irish subsidiary, or by transferring a patent to an overseas subsidiary so that revenues on licensing that patent flow through the subsidiary. Sometimes, the money isn't even actually overseas, but is deposited in U.S. banks and is being used for domestic purposes. In any event, regardless of where the money ends up being deposited, it is not "trapped overseas," as corporate lobbyists and their supporters in Congress often say; it's just that they don't want to pay a higher tax on that money.
The last time corporations got a repatriation tax holiday in exchange for the promise to use the profits in job-creating investments, in 2004, corporations instead ended up using the money brought back into the country to boost shareholder dividends and buy back stock (which drives up stock prices and, often, the compensation of CEOs). There is little reason to believe that the same thing wouldn't happen again in 2015.
Setting a bargain-basement tax rate for profits booked through foreign subsidiaries serves as nothing more than an incentive for corporations to escalate the schemes - or a wedge to convince lawmakers that if an ultra-low corporate tax rate is good for profits repatriated from overseas, perhaps all corporate profits should be taxed at that rate.
In any event, it is the rest of us who end up being the losers. When multinational corporations don't pay their fair share in taxes, the rest of us have to make up the difference - or suffer the inability to pay for the things that we need, like good roads and public transportation. That includes businesses who don't have the capacity to set up the fancy tax dodges that their competitors use.
What we need is honest tax reform that makes corporations and the wealthy pay their fair share, closing the door for good on the loopholes and schemes they use to avoid paying taxes. We also need an honest and equitable way to pay for the infrastructure improvements we need. Both are possible, but not without considerable heat from an aroused public. Congress will have to decide this year how it will pay for a multiyear transportation bill. We can't let the default option be coins from the table of corporate tax avoidance.
There is no real argument over whether the nation needs to do more to improve its infrastructure - its transportation, water, power and information networks. But there is an argument over how best to pay for it all - and that argument is increasingly turning in a dangerous direction.
Financially stressed working-class households who are at best treading water, if not actually sinking, in today's economy aren't eager to dig deeper into their own pockets to foot the bill. That's even more true of the plutocrat class, which has an army of lobbyists at the ready to shut down any suggestion that those who arguably would benefit the most from such things as better roads and public transportation should shoulder the larger share of the load.
Politicians of both parties in Washington are therefore increasingly relying on one of the schemes in the voodoo economics toolbox: give corporations hoarding money overseas to avoid taxation a form of tax holiday in exchange for increased corporate funding for infrastructure.
The Bond Buyer financial news site reports that Sen. Rand Paul (R-Texas) and Sen. Barbara Boxer (D-Calif.) are close to agreeing on a plan that would give multinationals a deep tax reduction on money they currently have stashed overseas if they bring the money back into the United States, also known as repatriation. Money collected would be deposited into the Highway Trust Fund, which is dedicated to paying for federal transportation projects.
Paul's promoting of this idea is not new; he had a bill last year that would have permanently cut the tax rate on profits corporations hold overseas, with the funds going into an emergency fund for what it considered high-priority highway projects. But his collaboration with Boxer is likely to give the idea more political momentum.
Meanwhile, the chairman of the House Transportation and Infrastructure Committee, Rep. Bill Shuster (R-Pa.), told the U.S. Conference of Mayors last week that raising the gasoline tax to pay for transportation improvements - the most logical near-term solution since that tax hasn't been raised in almost 22 years - is off the table in his committee. Instead, "the number one source that's being talked about is this repatriation of funds," he said, according to The Hill newspaper.
Rep. John Delaney (D-Md.) is a leading proponent of a repatriation-for-transportation-funding scheme. In December he filed a bill expected to be reintroduced this year that would allow multinational corporations to bring back overseas profits at a tax rate of 8.75 percent instead of the current statutory tax rate of 35 percent. The revenue collected would be placed in the Highway Trust Fund and in a $50 billion America Infrastructure Fund, which would be used to leverage up to $750 billion worth of state, local and private funding for infrastructure projects around the country.
With the White House giving its tacit blessing to such schemes while refusing to support proposals to raise funding in other ways, tapping profits now held overseas at a deeply discounted tax rate is becoming the default position for how to begin covering a more-than-$1 trillion infrastructure investment deficit.
But is rewarding tax avoidance really the way to fund our public infrastructure needs?
The biggest problem with the Delaney proposal, and the similar proposal from Paul, is that "it would allow companies such as Apple and Microsoft, which have parked hundreds of billions of dollars of U.S. profits in offshore tax havens, to pay a U.S. tax rate of no more than of 8.75 percent, instead of the more than 30 percent tax they should pay on these profits," says an analysis by Citizens for Tax Justice.
These profits - more than $2 trillion - are usually laundered through foreign subsidiaries in low-tax or no-tax countries in ways designed to avoid U.S. taxes. That can be done as simply as having that online purchase you think you are making through an American-based company actually handled by a Swiss or Irish subsidiary, or by transferring a patent to an overseas subsidiary so that revenues on licensing that patent flow through the subsidiary. Sometimes, the money isn't even actually overseas, but is deposited in U.S. banks and is being used for domestic purposes. In any event, regardless of where the money ends up being deposited, it is not "trapped overseas," as corporate lobbyists and their supporters in Congress often say; it's just that they don't want to pay a higher tax on that money.
The last time corporations got a repatriation tax holiday in exchange for the promise to use the profits in job-creating investments, in 2004, corporations instead ended up using the money brought back into the country to boost shareholder dividends and buy back stock (which drives up stock prices and, often, the compensation of CEOs). There is little reason to believe that the same thing wouldn't happen again in 2015.
Setting a bargain-basement tax rate for profits booked through foreign subsidiaries serves as nothing more than an incentive for corporations to escalate the schemes - or a wedge to convince lawmakers that if an ultra-low corporate tax rate is good for profits repatriated from overseas, perhaps all corporate profits should be taxed at that rate.
In any event, it is the rest of us who end up being the losers. When multinational corporations don't pay their fair share in taxes, the rest of us have to make up the difference - or suffer the inability to pay for the things that we need, like good roads and public transportation. That includes businesses who don't have the capacity to set up the fancy tax dodges that their competitors use.
What we need is honest tax reform that makes corporations and the wealthy pay their fair share, closing the door for good on the loopholes and schemes they use to avoid paying taxes. We also need an honest and equitable way to pay for the infrastructure improvements we need. Both are possible, but not without considerable heat from an aroused public. Congress will have to decide this year how it will pay for a multiyear transportation bill. We can't let the default option be coins from the table of corporate tax avoidance.