We retired Tax Justice Blog in April 2017. For new content on issues related to tax justice, go to www.justtaxesblog.org
New CTJ Report: Fortune 500 Corporations Holding $1.6 Trillion in Profits Offshore
More Evidence that the Corporate Lobbyists’ Version of Tax “Reform” Should NOT Be a Part of Any Budget Deal
A new report from Citizens for Tax Justice explains that among the Fortune 500 corporations, 290 have revealed that they, collectively, held nearly $1.6 trillion in profits outside the United States at the end of 2011. This is one indication of how much they might benefit from a so-called “territorial” tax system, which would permanently exempt these offshore profits from U.S. taxes.
Just 20 of the corporations — including household names like GE, Microsoft, Apple, IBM, Coca-Cola and Goldman Sachs — held $794 billion offshore, half of the total. The data are compiled from figures buried deep in the footnotes of the “10-K” financial reports filed by the companies annually with the Securities and Exchange Commission.
The appendix of the report includes the full list of 290 corporations and the size of their offshore profits in each of the last three years, as well as the state in which their headquarters is located.
Corporate lobbyists and their allies in Congress are pushing for two changes that would benefit their investors but leave America worse off. Neither one of these should be included in any deal coming out of the so-called “fiscal cliff” negotiations.
Congress Should Reject a Revenue-Neutral Corporate Tax Overhaul
The first goal of the corporate lobbyists is an overhaul of the corporate tax that does not raise any revenue. Some corporations have stated that they would support closing corporate tax loopholes, but only if all the revenue savings is used to reduce the corporate tax rate. This would be a terrible waste of revenue at a time when lawmakers are considering cutting public investments that middle-income people rely on in order to reduce the deficit.
In May of 2011, a letter circulated by Citizens for Tax Justice was signed by 250 organizations, including organizations from every state, calling on Congress to close corporate tax loopholes and use the revenue saved for public investments and deficit reduction rather than lowering the corporate tax rate.
Unfortunately, the Obama administration endorsed a revenue-neutral corporate tax overhaul in the vague “framework” it released in February of this year. As lawmakers face real choices about whether to cut programs like Medicare, Medicaid, and education, we believe many will realize that demanding corporations contribute more to the society that makes their profits possible is more sensible.
Congress Should Reject a Territorial Tax System
The second goal of the corporate lobbyists is a transition to a “territorial” tax system, which would call off U.S. taxes on the offshore profits of U.S. corporations. As the new CTJ report explains, many of those profits are truly U.S. profits that have been made to look like “foreign” profits generated in tax havens through convoluted accounting schemes.
Thankfully, the administration has not endorsed a territorial tax system and Vice President Biden even criticized it during his speech at the Democratic National Convention. We hope that the President and his allies in Congress hold firm to this position.