America’s 50 Biggest Corporations Are Hiding Over $1 Trillion Overseas – Huffington Post

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Defenders of corporate tax strategies blame the official U.S. corporate tax rates, which are among the highest in the world. The United States, they note, is also one of the few countries that taxes foreign earnings at domestic rates. A “territorial” system in which profits are taxed at the rates of the countries where they are earned is more common.

But thanks to a tax “deferral” loophole, U.S. companies only pay domestic taxes on foreign earnings if they “repatriate” the earnings by bringing them back to the U.S. That gives companies a particular incentive to hoard money elsewhere — sometimes indefinitely — in order to defer taxation.

Obama has proposed a framework for corporate tax reform that would embrace lower rates and fewer loopholes with the goal of at least maintaining current revenue levels from corporate taxes — and increasing corporate investment at home.

“Whether you are a liberal or a conservative, you want to get that tax rate down,” said Martin Sullivan, chief economist at the tax news and analysis website Tax Analysts.

“If the Obama administration, which I think has been the most aggressive of any administration in recent history in trying to shut down this problem,” does not think it can be solved through enforcement alone, no president will, Sullivan argued.

Many progressive fair taxation advocates, however, contend that the government can and should rely solely on closing corporate tax loopholes to bring companies into line and replenish federal coffers.

Bob McIntyre, director of Citizens for Tax Justice, said one simple way to do that would be to end the foreign tax deferral loophole that allows companies to avoid domestic taxes until they repatriate the earnings. That way they would have to pay domestic taxes on foreign profits even if they are holding it elsewhere.

Democratic presidential candidate Sen. Bernie Sanders (I-Vt.) has made the change part of his campaign platform

To stop inversions, McIntyre suggested, the government could force companies to pay a so-called exit tax before leaving the U.S., taxing the profits they had earned overseas up to that point. Hillary Clinton, Sanders’ rival for the Democratic presidential nomination, backs that idea. 

McIntyre rejects the notion of lowering corporate taxes to compete with lower tax nations.

“The main purpose of tax reform should be to fund the government, and anything else is just a waste of time,” he concluded.

America’s 50 Biggest Corporations Are Hiding Over $1 Trillion Overseas – Huffington Post