More than 80 of America's largest 100 publicly traded companies shift profits offshore to avoid paying taxes in the United States. All told, tax havens cost American taxpayers $100 billion a year in lost revenue.
Now corporate America is pushing for a sweetheart deal that would let them bring the money back home at a massively discounted tax rate.
Some offshore subsidiaries are nothing more than P.O. boxes. In fact, 18,857 "corporate headquarters" are registered at a single address in the Cayman Islands. With close to 1,000 lawyers and accountants in its tax department, General Electric managed to pay zero dollars in U.S.
taxes on its American profits in 2010.
Here in Ohio, to make up for tax dodgers, the rest of the state's individual tax filers had to pay over $4.8 billion in 2010, according to a study done by Ohio Public Interest Research Group (Ohio PIRG). That breaks down to each taxpayer paying on average an extra $585, the seventh highest amount in the country. If a corporation benefits from American education, infrastructure, and national security, it should pay the taxes it owes to America.
An army of corporate lobbyists on Capitol Hill is trying to sell Congress on a "repatriation" holiday, allowing corporations to pay just a five to eight percent tax rate, instead of the usual 35 percent, on
nearly $1.4 trillion in profits that is sitting offshore.
We've been down this road before. Congress and the American taxpayer were fooled once into giving corporations a tax holiday in 2004 on the promise of job creation. Yet the firms that benefited most actually shed jobs, bought their own stock to boost the price, and increased executive
pay. Eagerly anticipating another holiday, they then shifted even more profits offshore. Small businesses and ordinary taxpayers who couldn't afford high-priced attorneys or accountants were then left to foot the bill.
The vast majority of U.S. corporations -- the small businesses that can't hire aggressive tax attorneys -- would not benefit at all.
A study recently released by the Senate Permanent Subcommittee on Investigations found that just 0.015 percent of American corporations could take advantage of the tax holiday in 2004. Pharmaceutical and high tech giants accounted for nearly half of the returned funds.
While a tax holiday for tax dodgers is wrong on principle, research shows that it also doesn't help the economy. The Senate study found that the 15 companies that brought back the most money in 2004 shed nearly 21,000 jobs. The companies didn't use the extra cash to invest in research and development either. So where did the money go? According to the study, these same top firms markedly increased stock buy-backs and upped executive pay by nearly 60 percent in the two years following the
At the end of the day, the only clear effect the last tax holiday had on the economy was to encourage companies to shift even more of their profits offshore. According to a study by the Congressional Research service, the nonpartisan research arm of Congress, firms that took most
advantage of the tax amnesty last time have increased the amount of cash stashed offshore by 81 percent. It's clear what lesson they learned.
One of the strangest things about the renewed push for a tax amnesty is that the160 plus corporate lobbyists fighting for it are pressuring the Super Committee, which is charged with cutting the deficit. They're undeterred by the nonpartisan Joint Committee on Taxation's finding that a corporate tax holiday will add at least $42 billion and as much as $78.7 billion (depending on the discounted tax rate) to the deficit over the next 10 years.
Simply put, a corporate tax holiday is nothing more than a giant giveaway to the wealthiest American corporations that use offshore tax havens. It encourages companies to engage in more of the same tax-dodging behavior and force small businesses and individual taxpayers to pick up the tab of the extra tax burden. Congress must not let the American taxpayer get fooled again.
Jacqueline Thomas is a program associate for the Ohio Public Interest Research Group (Ohio PIRG)