Pols keep giving corporate tax dodgers a free pass
Remember that $2.1 trillion of corporate tax profits parked overseas? Well, it’s still there (and growing every day) and politicians are still trying to find a way to lure or compel companies to bring it home.
On Monday, President Obama sent a $478 billion transportation bill to Congress funded largely by taxing the overseas profits of large corporations. The bill would require companies to repatriate earnings at a 14% tax rate vs. the 35% corporate tax rate.
A big reason you haven’t heard much about this is the President bill’s is largely considered DOA.
“I just don’t see this moving,” says Greg Valliere, chief political strategist at Potomac Research. “The 14% tax rate is a total non-starter for the GOP. If it was 3% or 4%, that would get them interested; but the White House is looking for a big revenue grab, which has zero support in the GOP.”
Plus, Rep. Paul Ryan (R-WI-), chair of the House Ways and Means Committee “has been clear that any kind of repatriation deal would have to be part of comprehensive tax reform,” Valliere notes. “And that’s not moving till much later this year, if then.”
Long before year-end, the Highway Trust Fund is going to run out of money. Given the abysmal state of U.S. infrastructure and the lack of political will in either party to raise the gas tax, there is some bipartisan support for a repatriation bill to replenish the Highway Fund.
Related: ‘A national embarrassment’: U.S. infrastructure suffers from bipartisan failure
And while neither gets to the 3%-4% rate Valliere says is needed to get Republicans on board, there are two proposals in Congress that may have a chance of becoming law — or at least getting to the President’s desk:
• Senators Boxer (D-CA) and Rand (R-KY) have floated a plan that would tax overseas profits at 6.5% while requiring corporations use some of the repatriated funds for jobs, research and development, environmental protection and to shore up corporate pensions. The Boxer-Rand plan is voluntary.
• Representative John Delaney (D-MD) proposed the Partnership to Rebuild America Act (HR 2084), which would tax overseas profits at 8.75%, with the proceeds going to replenish the Highway Trust Fund and creating a new national infrastructure bank.
“I’m really concerned that if any of any these tax cuts for overseas corporate profits go ahead we’re really burning our bridges to the future,” says Sarah Anderson, director of the Global Economy Project at the Institute for Policy Studies. “The ideal solution would be to fix our corporate tax system. Right now it’s all a big game and the offshore tax dodgers are winning. If we lock in these kinds of tax cuts it’s really game over.”
As discussed in the accompanying video, the Institute for Policy Studies has a new report detailing how far repatriation of overseas profits would go in addressing what the American Society of Civil Engineers estimates is $3.6 trillion of infrastructure investment needed between now and 2020. Among the highlights:
• As of the end of 2014, just 26 companies account for more than half of the $2.1 trillion of overseas profits, led by Apple ($157.8 billion), General Electric ($119 billion) and Microsoft ($92.9 billion). If those 26 firms paid taxes on those profits it would generate “more than enough [revenue] to cover the cost of repairing all of the country’s wastewater and stormwater systems, with enough left over to repair or replace all of the country’s dangerous and deficient dams and restore all the nation’s local, state, and national parks,” according to the report.
• Seven pharmaceutical firms are among the 26 “mega-stockpilers,” led by Pfizer ($74 billion), Merck ($60 billion) and Johnson & Johnson ($53.4 billion). “If these seven drug companies were to pay the taxes they owe, it would generate an estimated $82 billion, enough to replace all of the deficient bridges in the United States.”
• If ExxonMobil ($51 billion) and Chevron ($35.7 billion) were to pay the taxes on their offshore profits, it could cover nearly a quarter of the cost of repairing all of the country’s levees.
“This infrastructure is critical for our nation’s economy,” Anderson says. “These businesses also depend on having strong infrastructure in this country. It’s not a loss for them…it’s for everyone’s benefit.”
To be fair, the Institute for Policy Studies’ findings assume a 35% tax rate on those overseas profits which just isn’t going to happen in the current political environment. But the report gives a sense of both the scope of America’s infrastructure needs and the huge amount of revenue the government has lost because of our byzantine and dysfunctional corporate tax code.