U.S. companies given Export-Import Bank subsidies keep profits offshore, skirt taxes
But like much of the budgeting in Washington, D.C., it gets complicated.
The Congressional Budget Office contends the Ex-Im Bank’s surpluses are the result of the accounting method the bank uses and would disappear — or require a taxpayer subsidy — if the bank used a more appropriate accounting standard.
The bank’s own accounting projects a surplus of about $14 billion through the next decade. However, former CBO director Douglas W. Elmendorf told Congress last year that the Ex-Im Bank will more likely lose $2 billion in the same period using the CBO’s method of accounting.
Ex-Im Bank has been a source of controversy this summer, opening a rift between tea party-backed Republicans who are fighting to close the bank and establishment Republicans who say Ex-Im helps keep U.S. companies competitive in the global economy.
Major business groups, including the U.S. Chamber of Commerce and the National Association of Manufacturers, are strong backers of the bank, saying the country’s biggest trading rivals offer the same kinds of subsidized financing to their companies.
The House blocked reauthorization this summer, which stopped any new loan guarantees. But the bank retained enough funding to continue basic operations.
⦁ Arthur Kane is a reporter for Watchdog.org, a national network of investigative reporters covering government waste, fraud and abuse. Josh Kaib, Grayson Quay, Steve Ambrose and Sarah Chavey contributed to this story.
“There’s a degree of a double standard when it comes to corporate welfare,” Mr. Gardner said, adding Ex-Im Bank is just one of several government programs where companies have benefited by keeping their profits abroad. “Why aren’t the people who are critics of subsidies also asking the same tough questions of [these] lavish giveaways?”
GE and Boeing aren’t isolated examples.
Exxon-Mobil and its subsidiaries exported $2.5 billion using Ex-Im Bank guarantees but kept $51 billion offshore. Caterpillar benefits from $1 billion in taxpayer guarantees but made sure $18 billion was offshore and not subject to U.S. coffers.
Caterpillar declined to comment.
Exxon is one of the largest taxpayers in the United States, and the company doesn’t expect a significant tax savings from its offshore proceeds, said spokesman Scott Silvestri.
“ExxonMobil strictly follows all applicable regulations and laws and is current on all tax returns and payments,” he wrote in an email exchange, adding that included sales, property and income taxes. “Over the past five years (2010 to 2014), the company’s total U.S. tax expense was $54 billion, which is $8.8 billion more than the company earned in the U.S. during the same period.”
Ex-Im Bank spokesman Lawton King declined to comment on how some U.S. companies that benefit from the bank loans also are shielding corporate proceeds from the IRS.
While ITEP’s Mr. Gardner suggested crony capitalism may be to blame, other experts say the United States corporate tax system is to blame for inducing companies not to repatriate their earnings. It’s cheaper to keep proceeds overseas where corporate tax rates can be a third or less of the 35 percent U.S. corporate tax rate.
“Companies would love to bring back some of this money, quite frankly, but it’s just too expensive,” said Sharon Lassar, a professor in the accounting school at University of Denver’s Daniels College of Business. “That’s a lot of tax to be paid just to get use of your income when you’re a global company, and there are other places you could use that income.”
Diane Katz, a senior fellow at The Heritage Foundation who studies the Ex-Im Bank, said it’s not clear the money these companies generate offshore is directly tied to Ex-Im loan guarantees, weakening the crony capitalism arguments. Additionally, because these offshore funds are often reinvested, the American worker may still ultimately benefit.
The funds are “being put to use,” Ms. Katz said. Corporations “don’t just sit on it. They want the money to work by reinvesting in operations, and there is a benefit to the U.S. or they repatriate it.”
Ex-Im Bank’s Mr. King said U.S. taxpayers are not bearing the costs of the Ex-Im Bank guarantees.
“First thing — it’s not a subsidy, and we charge for it,” he said in a brief phone exchange. “That’s why the bank turns a profit.”
Bank officials tout that Ex-Im has had annual surpluses since 2008 and contributed $675 million to the U.S. Treasury last year.