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Nabisco, the purveyor of Oreos and ‘Nilla wafers, is facing renewed blowback over its decision to lay off 600 workers at its Chicago plant while shifting production to Mexico. But the loss of manufacturing jobs is not the sole reason the company’s activities deserve closer scrutiny.
A corporate spokesperson predictably explained that the layoffs were about automation rather than offshoring, but others have hinted that the very low worldwide tax rates paid by Nabisco’s parent company, Mondelez, might have played a role in the decision.
The real story is likely far more complicated. USA Today reports that Mondelez paid a worldwide tax rate of 7.5 percent last year. This is well below the United States’s statutory 35 percent corporate tax rate and also substantially below Mexico’s 30 percent rate. If Mondelez is avoiding taxes through its foreign activities, it is more likely that the company’s subsidiaries in the Bahamas and the Netherlands are responsible.
Call It a Double Whammy
While losing 600 jobs would deal a body blow to Chicago working families, the $6 billion of profits that Mondelez moved offshore in just the last year (and the needed tax contributions it is able to avoid because of this action) represent yet another way the company is harming working families.
Mondelez now has a total of $19.2 billion in “permanently reinvested” offshore profits, but the company refuses to disclose how much of those profits are being held in tax havens or whether any foreign tax has been paid on these billions of dollars in profits.
Several politicians have cried foul, including presidential candidate Hillary Clinton who responded to Nabisco’s move by proposing that companies moving jobs overseas should lose some or all of the tax breaks previously received for domestic job creation.
Such a plan could raise difficult implementation questions (for example, should Mondelez lose its tax breaks for domestic Triscuit production just because the company moves its Oreo production abroad?). Even so, the goal of “clawing back” undeserved tax breaks is a sensible one that has been achieved in a number of states, thanks in part to the work of watchdog group Good Jobs First. But a fiscally important reform would be taking away the incentive for corporations to shift their profits into offshore tax havens to avoid U.S. income taxes.